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Journal of Agricultural and Resource Economics >
Volume 18, Number 01, July 1993 >
Please use this identifier to cite or link to this item:
http://purl.umn.edu/30810
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| Title: | RISK AND PROBABILITY PREMIUMS FOR CARA UTILITY FUNCTIONS |
| Authors: | Babcock, Bruce A.
Choi, E. Kwan
Feinerman, Eli |
| Issue Date: | 1993-07 |
| Abstract: | The risk premium and the probability premium are used to determine appropriate coefficients of absolute risk aversion under CARA utility. A defensible range of risk aversion coefficients is defined by the coefficients that correspond to risk premiums falling between 1 and 99% of the amount at risk or to probability premiums falling between .005 and .49 for a lottery that pays or loses a given sum. The consequences of ignoring risk premiums when selecting risk-aversion coefficients for representative decision makers are illustrated by calculation of the implied risk premium associated with the levels of absolute risk aversion assumed in six selected studies. |
| URI: | http://purl.umn.edu/30810 |
| Institution/Association: | Journal of Agricultural and Resource Economics>Volume 18, Number 01, July 1993 |
| Total Pages: | 8 |
| Language: | English |
| From Page: | 17 |
| To Page: | 24 |
| Collections: | Volume 18, Number 01, July 1993
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| 18010017.pdf | 626Kb | PDF | View/Open |
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