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Title:Utility Functions of Equivalent Form and the Effect of Parameter Changes on Optimum Decision Making PDF Logo
Authors:Broll, Udo
Battermann, Harald L.
Wahl, Jack E.
Issue Date:2006
Series/Report no.:Dresden discussion paper in economics 02/06
Abstract:We derive a class of utility functions that are equivalent with respect to a well-defined functional form. We study the case of constant relative risk aversion (of some order) to investigate on different equivalence relations in order to determine the, possibly infinite, number of equivalence classes when utility functions satisfy a specific form. Then we apply our results to standard applications in economics and finance, for example, to the effect of price volatility on optimum hedging.
Subjects:equivalence class
risk aversion
sensitivity analysis
JEL:G11
D11
D81
Document Type:Working Paper
Appears in Collections:Dresden Discussion Paper Series in Economics, Faculty of Business and Economics, TU Dresden

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