Theory and Decision 52 (2):149-170 (2002)
|Abstract||A usual argument in finance refers to no arbitrage opportunities for the positivity of the bid-ask spread. Here we follow the decision theory approach and show that if positivity of the bid-ask spread is identified with strong risk aversion for an expected utility market-maker, this is no longer true for a rank-dependent expected utility one. For such a decision-maker only a very weak form of risk aversion is required, a result which seems more in accordance with his actual behavior. We conclude by showing that the no-trade interval result of Dow and Werlang (1992a) remains valid for a rank-dependent expected utility market-maker merely exhibiting this weak form of risk aversion|
|Keywords||No keywords specified (fix it)|
|Through your library||Configure|
Similar books and articles
Paola Ferretti, Temporal Risk Aversion: What Determines the Attitude of the Decision Maker? The Case of the Buyer Decision Maker.
Richard Watt, Francisco J. Vázquez & Ignacio Moreno (2001). An Experiment on Rational Insurance Decisions. Theory and Decision 51 (2/4):247-296.
Andreas Lange (2001). A Note on Decisions Under Uncertainty: The Impact of the Choice of the Welfare Measure. Theory and Decision 51 (1):51-71.
David Kelsey (1992). Risk and Risk Aversion for State-Dependent Utility. Theory and Decision 33 (1):71-82.
Paul Weirich (1986). Expected Utility and Risk. British Journal for the Philosophy of Science 37 (4):419-442.
Louis Eeckhoudt & Béatrice Rey (2011). Risk Vulnerability: A Graphical Interpretation. Theory and Decision 71 (2):227-234.
Gerald L. Nordquist (1985). On the Risk-Aversion Comparability of State-Dependent Utility Functions. Theory and Decision 18 (3):287-300.
Harrell W. Chesson & W. Kip Viscusi (2003). Commonalities in Time and Ambiguity Aversion for Long-Term Risks. Theory and Decision 54 (1):57-71.
Peter Wakker (1994). Separating Marginal Utility and Probabilistic Risk Aversion. Theory and Decision 36 (1):1-44.
Alfred Müller & Marco Scarsini (2002). Even Risk-Averters May Love Risk. Theory and Decision 52 (1):81-99.
Michael Smithson (2006). Scale Construction From a Decisional Viewpoint. Minds and Machines 16 (3).
Aldo Montesano (1985). The Ordinal Utility Under Uncertainty and the Measure of Risk Aversion in Terms of Preferences. Theory and Decision 18 (1):73-85.
Gerd Weinrich (1999). Nondegenerate Intervals of No-Trade Prices for Risk Averse Traders. Theory and Decision 46 (1):79-99.
Jonathan Shalev (2002). Loss Aversion and Bargaining. Theory and Decision 52 (3):201-232.
Stephen Morris (1997). Risk, Uncertainty and Hidden Information. Theory and Decision 42 (3):235-269.
Added to index2010-09-02
Total downloads4 ( #180,507 of 556,888 )
Recent downloads (6 months)1 ( #64,931 of 556,888 )
How can I increase my downloads?