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Marc Henry, Montréal University Print
Thursday, 03 May 2012, 12:15 - 13:15

Marc Henry, Montréal University

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LOCAL UTILITY AND MULTIVARIATE RISK AVERSION

Abstract: We revisit Machina's local utility as a tool to analyze attitudes to multivariate risks. Using martingale embedding techniques, we show that for non-expected utility maximizers choosing between multivariate prospects, aversion to multivariate mean preserving increases in risk is equivalent to the concavity of the local utility functions, thereby generalizing Machina's result in [18]. To analyze comparative risk attitudes within the multivariate extension of rank dependent expected utility of [10], we extend Quiggin's monotone mean and utility preserving increases in risk and show that the useful characterization given in [17] still holds in the multivariate case.

Location: R42.2.113
Contact: Claude Adan, This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

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