If x is a monetary value (a payoff if positive,a cost if negative),U(x)the utility of this value,and R 0 is an adjustable parameter called the risk tolerance,then the function U(x)= 1 - $e ^ { x d R }$
Is called
A) Poisson utility
B) exponential utility
C) binomial utility
D) normal utility

Question

If x is a monetary value (a payoff if positive,a cost if negative),U(x)the utility of this value,and R > 0 is an adjustable parameter called the risk tolerance,then the function U(x)= 1 - $e ^ { x d R }$
Is called
A) Poisson utility
B) exponential utility
C) binomial utility
D) normal utility

Quizplus · Accepted Answer

The function U(x) = 1 - $e^{x/R}$ is known as the exponential utility function, which is commonly used in economics and finance to model risk-averse behavior.

If X Is a Monetary Value (A Payoff If Positive,a exdRe ^ { x d R }exdR

If X Is a Monetary Value (A Payoff If Positive,a $e ^ { x d R }$