Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Effects of background risks on cautiousness with an application to a portfolio choice problem
AU - Hara, Chiaki
AU - Huang, James
AU - Kuzmics, Christoph
PY - 2011/1
Y1 - 2011/1
N2 - We provide necessary and sufficient conditions on an individual's expected utility function under which any zero-mean idiosyncratic risk increases cautiousness (the derivative of the reciprocal of the absolute risk aversion), which is the key determinant for this individual's demand for options and portfolio insurance.
AB - We provide necessary and sufficient conditions on an individual's expected utility function under which any zero-mean idiosyncratic risk increases cautiousness (the derivative of the reciprocal of the absolute risk aversion), which is the key determinant for this individual's demand for options and portfolio insurance.
KW - Risk aversion
KW - risk tolerance
KW - cautiousness
KW - portfolio insurance
KW - idiosyncratic risks
KW - background risks
KW - incomplete markets
U2 - 10.1016/j.jet.2010.08.005
DO - 10.1016/j.jet.2010.08.005
M3 - Journal article
VL - 146
SP - 346
EP - 358
JO - Journal of Economic Theory
JF - Journal of Economic Theory
SN - 0022-0531
IS - 1
ER -