How to Calibrate a Questionnaire for Risk Measurement?
Utility functions content parameters related to risk aversion coefficients which represent natural extensions of utility function properties. They measure how much utility we gain (or lose) as we add (or subtract) from our wealth. We set up these parameters for a person based on her/his answers to a questionnaire constructed to identify individual risk behavior. Calibration of such a questionnaire, and subsequently of utility functions, is based on an expected utility maximization of different alternatives of investment strategies. In the paper, we present questionnaire calibration methodology which we illustrate using absolute and relative risk aversion coefficients of two selected utility functions which have common, as well as different properties.
KeywordsQuestionnaire Utility function Risk measurement Calibration Premium
Jana Špirková has been supported by the Project VEGA no. 1/0093/17 Identification of risk factors and their impact on products of the insurance and savings schemes.
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