Premium
Risk Modeling Using Direct Solution of Nonlinear Approximations of the Utility Function
Author(s) -
Lambert David K.,
McCarl Bruce A.
Publication year - 1985
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1241825
Subject(s) - nonlinear system , constant (computer programming) , utility maximization , maximization , mathematical optimization , risk aversion (psychology) , nonlinear programming , function (biology) , mathematics , computer science , expected utility hypothesis , mathematical economics , physics , quantum mechanics , evolutionary biology , biology , programming language
A risk model is developed which involves direct solution of the expected utility maximization problem utilizing nonlinear programming. The model permits the use of utility functions exhibiting increasing, constant, and decreasing absolute risk aversion. Demonstrations are done using functions exhibiting such properties over normal, uniform, and triangular data sets.