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Results tagged with risk
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user 13313
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Proof: Risk averse; Certainty Equivalent smaller than expected value
$$CE(F,u) \leq \int_{-\infty}^{\infty} x dF(x) \quad \forall F(\cdot)$$
By Jensens Inequality for risk-averse agents we have:
$$\int_{-\infty}^{\infty} u(x) f(x)dx \leq u(\int_{-\infty}^{\infty} x … I thought perhaps showing that the risk premium is positive for risk-averse agents is equivalent but I could not get started either.
I would be glad for a hint to work out the solution myself. …
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