This quantity is separated for levered and unlevered firms on the two sides of Hamada's equation. The denominator of the Sharpe ratio is this quantity for a given strategy. The negative ratio of the second derivative of utility to the first derivative of utility is calculated to compute the absolute and relative measures of this quantity which are named for (*) Pratt and Arrow. To counter against adverse selection, firms often select for low values of this. For a financial security, returns must include a premium for this when compared to a security with a value of zero for this. If utility curves are concave, and thus demonstrate diminishing
This quantity is separated for levered and unlevered firms on the two sides of Hamada's equation. The denominator of the Sharpe ratio is this quantity for a given strategy. The negative ratio of the second derivative of utility to the first derivative of utility is calculated to compute the absolute and relative measures of this quantity which are named for (*) Pratt and Arrow. To counter against adverse selection, firms often select for low values of this. For a financial security, returns must include a premium for this when compared to a security with a value of zero for this. If utility curves are concave, and thus demonstrate diminishing marginal utility, then individuals are said to be averse to this. For 10 points, name this economic measure of the potential variability of future outcomes.
This quantity is separated for levered and unlevered firms on the two sides of Hamada's equation.
risk [accept beta until "Sharpe", do NOT accept after]