Financial Economics
Utility functions as a model of attitude towards risk
Nikola Cholakov - University of National and World Economy
Received: 10 Jun 2022
Revised:
Published:
Downloads: 0
Citations: 0
Issue 1/2013
JEL
G32
D81
G22
Abstract
In this paper we follow such an approach which explains the motivation and behavior of both insured and insurers and throws some light on the background of the insurance premiums. In addition it is shown that according to the Law of diminishing marginal utility more risk aversive and cautious attitude limits the negative impact of incurred financial losses on utility scale.