In the last essay, we consider a situation in which an individual has to pay for a good before he realizes the state-dependent surplus of the good. This ex-ante willingness to pay is called the option price and the difference between the option price and the expected surplus is the option value. We find that the option value actually is the buying price for a fixed payment of the expected surplus, and there is a special case in which the option value equals the negative of the compensating risk premium. We also find the effects on the option price and the option value when the expected utility assumption is replaced by a rank-dependent expected utility.In the last essay, we consider a situation in which an individual has to pay for a good before he realizes the state-dependent surplus of the good.

Title | : | Essays on Risk Aversion |

Author | : | Paan Jindapon |

Publisher | : | ProQuest - 2006 |

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