Risk Attitudes (Actitudes Hacia El Riesgo)

43 Pages Posted: 16 May 2007  

Ignacio Velez-Pareja

Grupo Consultor CAV Capital Advisory & Valuation

Date Written: October 20, 2003

Abstract

This is a course material from the book Managerial Decision Making Under Risk and Uncertainty. The book is originally in Spanish and is untitled as Decisiones empresariales bajo riesgo e incertidumbre. The level of the book is basic. We use very few mathematics and it is expected to be used by managers.

In this fifth chapter we deal with the attitudes toward risk. We present the classical cardinal utility theory and illustrate the three well know cases of attitudes toward risk: averse toward risk, indifferent toward risk and propense toward risk. We also present the concept of certainty equivalent. We mention the limitations of the cardinal utility theory. We include a short reference to the prospect theory by Kahneman and Tversky. We illustrate the concept of risk aversion with a real life lottery example.

Notes: Downloadable document is in Spanish

Keywords: Risk, risk attitudes, cardinal utility theory, risk aversion, risk propension, risk indifference

JEL Classification: G31

Suggested Citation

Velez-Pareja, Ignacio, Risk Attitudes (Actitudes Hacia El Riesgo) (October 20, 2003). Available at SSRN: https://ssrn.com/abstract=986884 or http://dx.doi.org/10.2139/ssrn.986884

Ignacio Velez-Pareja (Contact Author)

Grupo Consultor CAV Capital Advisory & Valuation ( email )

Ave Miramar # 18-93 Apt 6A
Cartagena
Colombia
+573112333074 (Phone)

HOME PAGE: http://cashflow88.com/decisiones/decisiones.html

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