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Risks with semi-infinite support: Characterizations and applications
- Title
- Risks with semi-infinite support: Characterizations and applications
- Authors
- Kim S.H.
- Ewha Authors
- 김성현
- SCOPUS Author ID
- 김성현
- Issue Date
- 2016
- Journal Title
- Journal of Economic Theory and Econometrics
- ISSN
- 1229-2893
- Citation
- Journal of Economic Theory and Econometrics vol. 27, no. 4, pp. 1 - 24
- Keywords
- CARA; Certainty equivalent; CRRA; Gamma and lognormal distributions; Moral hazard
- Publisher
- Korean Econometric Society
- Indexed
- SCOPUS
- Document Type
- Article
- Abstract
- There are many situations that we need to model as risky prospects whose values are censored below at 0, hence defined on semi-infinite support. As useful tools for such models, we derive analytic characterizations of risks such as certainty equivalent and risk premium, for gamma and lognormal distributions and utility functions that have constant risk aversion. As a main application, we consider an extension of the ‘linear contract, exponential utility, normally distributed risks’ (LEN) moral hazard model to gamma distributed risks. We also discuss other potential applications, ranging from loan contracts to comparison of income distributions. © 2016, Korean Econometric Society. All rights reserved.
- Appears in Collections:
- 사회과학대학 > 경제학전공 > Journal papers
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