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Proofs for the New Definitions in Financial Markets

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  • Aras, Atilla
Abstract
Constructing theorems can help to determine the shape of certain utility curves that make up the new definitions in financial markets. The aim of this study was to present proofs for these theorems. Although the terms “risk-averse,” “risk-loving,” and “risk-neutral” are equivalent to “strict concavity,” “strict convexity,” and “linearity,” respectively, in standard theory, certain new definitions satisfy strict concavity or strict convexity, or linearity.

Suggested Citation

  • Aras, Atilla, 2023. "Proofs for the New Definitions in Financial Markets," OSF Preprints yac7z, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:yac7z
    DOI: 10.31219/osf.io/yac7z
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    References listed on IDEAS

    as
    1. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    2. Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June.
    3. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(4), pages 643-669.
    4. Machina, Mark J, 1982. ""Expected Utility" Analysis without the Independence Axiom," Econometrica, Econometric Society, vol. 50(2), pages 277-323, March.
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