Indifference pricing with uncertainty averse preferences |
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Authors: | Flavia Giammarino Pauline Barrieu |
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Institution: | Department of Statistics, Columbia House, London School of Economics, Houghton Street, London WC2A 2AE, United Kingdom |
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Abstract: | We consider the indifference valuation of an uncertain monetary payoff from the perspective of an uncertainty averse decision maker. We study how the indifference valuation depends on the decision maker’s attitudes toward uncertainty. We obtain a characterization of comparative uncertainty aversion and various characterizations of increasing, decreasing, and constant uncertainty aversion. |
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Keywords: | Indifference pricing Uncertainty aversion Risk measures Quasiconvexity Cash-subadditivity |
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