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Risk vulnerability: a graphical interpretation

Theory and Decision volume 71, pages 227–234 (2011)Cite this article

Abstract

The article gives a graphical interpretation of the concept of risk vulnerability. It shows that in a specific context of binary lotteries the assumption of risk vulnerability adds to prudence what the assumption of decreasing absolute risk aversion adds to risk aversion. We end the presentation showing that results can be extended to the concept of multiplicative risk vulnerability.

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Authors and Affiliations

  1. IÉSEG School of Management, Lille, France

    Louis Eeckhoudt

  2. CORE, Université de Louvain, Louvain, Belgium

    Louis Eeckhoudt

  3. Université de Lyon, Université Lyon 1, ISFA Actuarial School, 50 Avenue Tony Garnier, 69366, Lyon Cedex 07, France

    Béatrice Rey

Authors
  1. Louis Eeckhoudt
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  2. Béatrice Rey
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Correspondence to Béatrice Rey.

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Eeckhoudt, L., Rey, B. Risk vulnerability: a graphical interpretation. Theory Decis 71, 227–234 (2011). https://doi.org/10.1007/s11238-009-9173-z

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  • DOI: https://doi.org/10.1007/s11238-009-9173-z

Keywords

  • Decreasing absolute risk aversion
  • Decreasing relative risk aversion
  • Prudence
  • Multiplicative risk vulnerability
  • Risk vulnerability