Maximum Level of Risk aversion

Related BrainMass Solutions

• Risk Taker or Risk Aversion

  Added explanation: The manager does not have a constant risk behavior. The manager is risk averter when the wealth level is low i.e. for the range M<50 and then turns into risk seeker when he attains a certain level of wealth.

• Relationship between risk aversion and investment decisions

  the level of risk tolerance accepted by the company.

• Risk aversion and stocks' prices and earned rates of return

  Risk free rate does not change with risk aversion as risk is not involved here. The slope of the SML (=market risk premium) reflects the general level of risk aversion. The higher the level of risk aversion, the steeper is the slope of the SML.

• Risk Version and Interest Rate Risk

  It is the slope of the SML (Market Risk Premium) that reflects the level of risk aversion, the higher the level of risk aversion, the steeper is the slope of the SML, and the opposite is true.

• Expected Utility, Relative Risk Aversion

  At what level of initial wealth will he be indifferent between taking on the risk of getting no income and buying the insurance that removes the risk?

• Risk aversion, reward-to-risk ratio and debt financing

  The slope of the SML reflects the general level of risk aversion. If investors become more risk averse, people will demand a larger premium for bearing any level of risk (i.e. higher return for the same level of risk indicated by beta).

• Need help with some homework questions

  Answer: As we know that the level of risk aversion differs for every investor.

• CARA: vNM utility with constant absolute risk aversion

  This is a classic graduate/advanced undergraduate level problem in microeconomics/finance. It asks to calculate utility function that corresponds to a constant Arrow-Pratt measure of absolute risk-aversion.

• standard deviation

  on their level of risk aversion The obvious answer is A.