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A General Index of Inherent Risk

Author

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  • Adi Schnytzer

    (Department of Economics and Logistics,respectively,Bar Ilan University,Israel)

  • Sara Westreich

Abstract

We extend the pioneering work of Aumann and Serrano by presenting an index of inherent riskiness of a gamble having the desirable properties of their index, while being applicable to gambles with either positive or negative expectations. As such, our index provides a measure of riskiness which is of use for both risk lovers and risk aversive gamblers, and is defined for all discrete and a large class of continuous gambles. We analyze abstract properties of our index, and present in addition three empirical applications - roulette, horse betting market and US options traded on financial stocks between 2005 and 2007.

Suggested Citation

  • Adi Schnytzer & Sara Westreich, 2009. "A General Index of Inherent Risk," Working Papers 2009-9, Bar-Ilan University, Department of Economics.
    • Handle: RePEc:biu:wpaper:2009-9
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