# Is there a natural intuitive interpretation of the **numerical value** of the coefficients of risk aversion?

We can write down the coefficient of absolute risk aversion $R_a$, or the coefficient of relative risk aversion $R_r$.

Are there intuitive interpretations of the numerical values of these coefficients? Let's say that someone has $R_a=5$ or $R_r=3$ for certain wealth level $W$, how would we interpret that number?

Under some regularity conditions, the coefficient of absolute risk aversion approximates the risk premium divided by half the variance for a small actuarily fair gamble. In Pratt's words, "$r(x)$ is twice the risk premium per unit of variance for infinitesimal risks". A similar interpretation holds for relative risk aversion, see Section 10.