In this paper we introduce an index of riskiness which allows the in-vestor to skim among investment alternatives without regards of any distributional assumptions of the gambles, but rather considering the threshold level of the wealth he is minded to eventually lose. This leads to a measure of riskiness which is able to let the investor accept-ing/rejecting gambles in a way as objective as possible (i.e. depending only on the probabilistic features of the gamble), and, at the same time, to take into account his own risk posture, that is by considering the risk attitude expressed by his utility function.
On some measures for riskiness
RESTA, MARINA;MARINA, MARIA ERMINIA
2012-01-01
Abstract
In this paper we introduce an index of riskiness which allows the in-vestor to skim among investment alternatives without regards of any distributional assumptions of the gambles, but rather considering the threshold level of the wealth he is minded to eventually lose. This leads to a measure of riskiness which is able to let the investor accept-ing/rejecting gambles in a way as objective as possible (i.e. depending only on the probabilistic features of the gamble), and, at the same time, to take into account his own risk posture, that is by considering the risk attitude expressed by his utility function.
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