Relevant bibliographies by topics / Constant relative risk aversion utility function (CRRA)

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Academic literature on the topic 'Constant relative risk aversion utility function (CRRA)'

Author: Grafiati
Published: 4 June 2021
Last updated: 19 February 2022

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Journal articles on the topic "Constant relative risk aversion utility function (CRRA)"

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Gong, Mingming, and Shulin Liu. "A First-Price Sealed-Bid Asymmetric Auction When Two Bidders Have Respective CRRA and General Utility Functions." Discrete Dynamics in Nature and Society 2021 (September 3, 2021): 1–15. http://dx.doi.org/10.1155/2021/5592402.

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We study a first-price auction with two bidders where one bidder is characterized by a constant relative risk aversion utility function (i.e., a concave power function) while the other has a general concave utility function. We establish the existence and uniqueness of the optimal strategic markups and analyze the effects of one bidder’s risk aversion level on the optimal strategic markups of him and his opponent’s, the allocative efficiency of the auction, and the seller’s expected revenue, respectively.
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Fleissig, Adrian R., A. Ronald Gallant, and John J. Seater. "SEPARABILITY, AGGREGATION, AND EULER EQUATION ESTIMATION." Macroeconomic Dynamics 4, no. 4 (2000): 547–72. http://dx.doi.org/10.1017/s1365100500017077.

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We derive a seminonparametric utility function containing the constant relative risk aversion (CRRA) function as a special case, and we estimate the associated Euler equations with U.S. consumption data. There is strong evidence that the CRRA function is misspecified. The correctly specified function includes lagged effects of durable goods and perhaps nondurable goods, is bounded as required by Arrow's Utility Boundedness Theorem, and has a positive rate of time preference. Constraining sample periods and separability structure to be consistent with the generalized axiom of revealed preferenc
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Perera, Ryle S. "Dynamic asset allocation for a bank under CRRA and HARA framework." International Journal of Financial Engineering 02, no. 03 (2015): 1550031. http://dx.doi.org/10.1142/s2424786315500310.

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This paper analyzes an optimal investment and management strategy for a bank under constant relative risk aversion (CRRA) and hyperbolic absolute risk aversion (HARA) utility functions. We assume that the bank can invest in treasuries, stock index fund and loans, in an environment subject to stochastic interest rate and inflation uncertainty. The interest rate and the expected rate of inflation follow a correlated Ornstein–Uhlenbeck processes and the risk premia are constants. Then we consider the portfolio choice under a power utility that the bank's shareholders can maximize expected utility
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Soriano-Morales, Yazmín Viridiana, Benjamín Vallejo-Jiménez, and Francisco Venegas-Martínez. "Impact of the degree of relative risk aversion, the interest rate and the exchange rate depreciation on economic welfare in a small open economy." PANORAMA ECONÓMICO 13, no. 25 (2018): 18. http://dx.doi.org/10.29201/pe-ipn.v13i25.175.

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This paper is aimed at assessing the impact of the degree of relative risk aversion on economic welfare for different levels of the interest rate and the exchange rate depreciation in a small open beconomy. To do this, a representative consumer-producer makes decisions on consumption, money balances, and leisure. In order to find a closed-form solution of the household’s economic welfare, it is assumed that individual’s preferences belong to the family of Constant Relative Risk Aversion (CRRA) utility functions. Several comparative statics graphical experiments about the effects of the degree
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Hu, Chunhua, Wenyi Huang, and Tianhao Xie. "The Investigation of a Wealth Distribution Model on Isolated Discrete Time Domains." Mathematical Problems in Engineering 2020 (February 11, 2020): 1–21. http://dx.doi.org/10.1155/2020/4353025.

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A wealth distribution model on isolated discrete time domains, which allows the wealth to exchange at irregular time intervals, is used to describe the effect of agent’s trading behavior on wealth distribution. We assume that the agents have different degrees of risk aversion. The hyperbolic absolute risk aversion (HARA) utility function is employed to describe the degrees of risk aversion of agents, including decreasing relative risk aversion (DRRA), increasing relative risk aversion (IRRA), and constant relative risk aversion (CRRA). The effect of agent’s expectation on wealth distribution i
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Monin, Phillip, and Thaleia Zariphopoulou. "On the optimal wealth process in a log-normal market: Applications to risk management." Journal of Financial Engineering 01, no. 02 (2014): 1450013. http://dx.doi.org/10.1142/s2345768614500135.

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Using a stochastic representation of the optimal wealth process in the classical Merton problem, we calculate its cumulative distribution and density functions and provide bounds and monotonicity results for these quantities under general risk preferences. We also show that the optimal wealth and portfolio processes for different utility functions are related through a deterministic transformation and appropriately modified initial conditions. We analyze the value at risk (VaR) and expected shortfall (ES) of the optimal wealth process and show how each can be used to infer a constant relative
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7

KINGSTON, GEOFFREY, and SUSAN THORP. "Annuitization and asset allocation with HARA utility." Journal of Pension Economics and Finance 4, no. 3 (2005): 225–48. http://dx.doi.org/10.1017/s1474747205002088.

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A new explanation for the well-known reluctance of retirees to buy life annuities is due to Milevsky and Young (2002, 2003): Since the decision to purchase longevity insurance is largely irreversible, in uncertain environments a real option to delay annuitization (RODA) generally has value. Milevsky and Young analytically identify and numerically estimate the RODA in a setting of constant relative risk aversion. This paper presents an extension to the case of HARA (or GLUM) preferences, the simplest representation of a consumption habit. The precise date of annuitization can no longer be ascer
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Shiraishi, Hiroshi. "A Simulation Approach to Statistical Estimation of Multiperiod Optimal Portfolios." Advances in Decision Sciences 2012 (June 5, 2012): 1–13. http://dx.doi.org/10.1155/2012/341476.

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This paper discusses a simulation-based method for solving discrete-time multiperiod portfolio choice problems under AR(1) process. The method is applicable even if the distributions of return processes are unknown. We first generate simulation sample paths of the random returns by using AR bootstrap. Then, for each sample path and each investment time, we obtain an optimal portfolio estimator, which optimizes a constant relative risk aversion (CRRA) utility function. When an investor considers an optimal investment strategy with portfolio rebalancing, it is convenient to introduce a value fun
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Gomes, Fábio Augusto Reis, and João Victor Issler. "TESTING CONSUMPTION OPTIMALITY USING AGGREGATE DATA." Macroeconomic Dynamics 21, no. 5 (2016): 1119–40. http://dx.doi.org/10.1017/s1365100515000085.

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This paper tests the optimality of consumption decisions at the aggregate level, taking into account popular deviations from the canonical constant-relative-risk-aversion (CRRA) utility function model—rule of thumb and habit. First, we provide extensive empirical evidence of the inappropriateness of linearization and testing strategies using Euler equations for consumption—a drawback for standard rule-of-thumb tests. Second, we propose a novel approach to testing for consumption optimality in this context: nonlinear estimation coupled with return aggregation, where rule-of-thumb behavior and h
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Levy, Haim, and Moshe Levy. "Prospect theory, constant relative risk aversion, and the investment horizon." PLOS ONE 16, no. 4 (2021): e0248904. http://dx.doi.org/10.1371/journal.pone.0248904.

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Prospect Theory (PT) and Constant-Relative-Risk-Aversion (CRRA) preferences have clear-cut and very different implications for the optimal asset allocation between a riskless asset and a risky stock as a function of the investment horizon. While CRRA implies that the optimal allocation is independent of the horizon, we show that PT implies a dramatic and discontinuous “jump” in the optimal allocation as the horizon increases. We experimentally test these predictions at the individual level. We find rather strong support for CRRA, but very little support for PT.
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Books on the topic "Constant relative risk aversion utility function (CRRA)"

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Back, Kerry E. Utility and Risk Aversion. Oxford University Press, 2017. http://dx.doi.org/10.1093/acprof:oso/9780190241148.003.0001.

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Expected utility is introduced. Risk aversion and its equivalence with concavity of the utility function (Jensen’s inequality) are explained. The concepts of relative risk aversion, absolute risk aversion, and risk tolerance are introduced. Certainty equivalents are defined. Expected utility is shown to imply second‐order risk aversion. Linear risk tolerance (hyperbolic absolute risk aversion), cautiousness parameters, constant relative risk aversion, and constant absolute risk aversion are described. Decreasing absolute risk aversion is shown to imply a preference for positive skewness. Prefe
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Back, Kerry E. Representative Investors. Oxford University Press, 2017. http://dx.doi.org/10.1093/acprof:oso/9780190241148.003.0007.

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There is a representative investor at any Pareto optimal competitive equilibrium. If investors have linear risk tolerance with the same cautiousness parameter, then there is a representative investor with the same utility function. When there is a representative investor, there is a factor model with the representative investor’s marginal utility of consumption as the factor. If the representative investor has constant relative risk aversion, then the risk‐free return and log equity premium can be calculated in terms of moments of aggregate consumption. The equity premium and risk‐free rate pu
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