Risk aversion
In economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter is equal to or higher in monetary value than the more certain outcome. Risk aversion explains the inclination to agree to a situation with a more predictable, but possibly lower payoff, rather than another situation with a highly unpredictable, but possibly higher payoff. For example, a risk-averse investor might choose to put their money into a bank account with a low but guaranteed interest rate, rather than into a stock that may have high expected returns, but also involves a chance of losing value.
Risk aversion - Wikipedia Jump to content From Wikipedia, the free encyclopedia Economics theory For the related psychological concept, see Risk aversion (psychology) . "Risk attitude" redirects here. For the concept in security studies and risk management, see Risk attitude (security) . Risk aversion (red) contrasted to risk neutrality (yellow) and risk loving (orange) in different settings. Left graph : A risk averse utility function is concave (from below), while a risk loving utility function is convex. Middle graph : In standard deviation-expected value space, risk averse indifference cur
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