Define decision of risk aversion or utility function measure
How can you make a decision of risk aversion or a utility function measure?
Expert
This is possible, a bank could tell all its workers ‘From such day forward the bank’s utility function is ...’ Or tests can be utilized to calculate an individual’s utility function by asking questions regarding his attitude to various trades, it can all be quantified. But now this subject is even seen as too academic. Though, the assumptions that lead to risk neutrality are clearly invalid the results which follow, and the avoidance of the two problems, implies which more people than not are swayed through its advantages.
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