Abstract
In this paper we introduce the inner rate of risk aversion (IRRA), which is based on the risk sensitive value measure. And we also introduce the ideas of the scale risk boundary (\(\lambda _{bdry}\)), the optimal scale (\(\lambda _{opt}\)) and the optimal value (\(V_{opt}\)). We first construct the rating table of assets based on the IRRA, and then tables of \(\lambda _{bdry}\), \(\lambda _{opt}\) and \(V_{opt}\). And finally we explain our strategy how to apply those tables to investment selection problems.
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Miyahara, Y. Inner Rate of Risk Aversion (IRRA) and Its Applications to Investment Selection. Asia-Pac Financ Markets 27, 193–212 (2020). https://doi.org/10.1007/s10690-019-09289-x
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DOI: https://doi.org/10.1007/s10690-019-09289-x