Decreasing absolute risk aversion : some clarification.

La Vallée (1968), in the expected utility model, gives a sufficient condition for positivity of the bid-selling spread. In this article, we show that this sufficient condition, namely decreasing absolute risk aversion (DARA) is in fact necessary. Moreover, we prove that the expected utility hypothesis and differentiability of the utility function are not required.

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Year of publication:	2008-03
Authors:	Abouda, Moez
Institutions:	Centre d'Économie de la Sorbonne, Université Paris 1 (Panthéon-Sorbonne)
Subject:	DARA \| NARA \| Bid-selling spread \| perfect hedging \| risk premium

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Extent:	application/pdf
Series:	Documents de travail du Centre d'Economie de la Sorbonne. - ISSN 1955-611X.
Type of publication:	Book / Working Paper
Language:	English
Notes:	7 pages
Classification:	D80 - Information and Uncertainty. General ; D81 - Criteria for Decision-Making under Risk and Uncertainty ; G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

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