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Explicit solution to the economic index of riskiness

Author

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  • Cui, Zhenyu
  • Wu, Cai
  • Zhu, Lingjiong

Abstract

In this paper, we develop an exact closed-form series expansion for the economic index of riskiness of general gambles in terms of moments information. Important special cases include the economic indexes of riskinesses proposed in Aumann and Serrano (2008); Bali et al. (2011); Foster and Hart (2009). Based on the closed-form formula, we characterize further theoretical properties for the economic index of riskiness. Numerical examples confirm the accuracy of the proposed closed-form formula.

Suggested Citation

  • Cui, Zhenyu & Wu, Cai & Zhu, Lingjiong, 2023. "Explicit solution to the economic index of riskiness," Economics Letters, Elsevier, vol. 232(C).
    • Handle: RePEc:eee:ecolet:v:232:y:2023:i:c:s0165176523003683
    DOI: 10.1016/j.econlet.2023.111343
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    References listed on IDEAS

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    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Robert J. Aumann & Roberto Serrano, 2008. "An Economic Index of Riskiness," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 810-836, October.
    3. Turan G. Bali & Nusret Cakici & Fousseni Chabi-Yo, 2011. "A Generalized Measure of Riskiness," Management Science, INFORMS, vol. 57(8), pages 1406-1423, August.
    4. , & ,, 2015. "The Foster-Hart measure of riskiness for general gambles," Theoretical Economics, Econometric Society, vol. 10(1), January.
    5. Dean P. Foster & Sergiu Hart, 2009. "An Operational Measure of Riskiness," Journal of Political Economy, University of Chicago Press, vol. 117(5), pages 785-814.
    6. Schulze, Klaas, 2014. "Existence and computation of the Aumann–Serrano index of riskiness and its extension," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 219-224.
    7. Homm, Ulrich & Pigorsch, Christian, 2012. "An operational interpretation and existence of the Aumann–Serrano index of riskiness," Economics Letters, Elsevier, vol. 114(3), pages 265-267.
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