More on parametric characterizations of risk aversion and prudence

This note provides an alternative proof for the equivalence of decreasing absolute prudence (DAP) in the expected utility framework and in a two-parametric approach where utility is a function of the mean and the standard deviation. In addition, we elucidate that the equivalence of DAP and the concavity of utility as a function of mean and variance, which was shown to hold for normally distributed stochastics in Lajeri and Nielsen [4], cannot be generalized. Copyright Springer-Verlag Berlin Heidelberg 2003