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Handbook of the Economics of Risk and Uncertainty
book

Handbook of the Economics of Risk and Uncertainty

by Mark Machina, W. Kip Viscusi
November 2013
Beginner content levelBeginner
896 pages
35h 10m
English
North Holland
Content preview from Handbook of the Economics of Risk and Uncertainty
Jack Meyer
102
example, in the one risky and one riskless asset portfolio model with unit initial wealth,
and where ρ is the riskless return and σ
r
and μ
r
are the risk and expected return for the
risky asset, the opportunity set in (σ, μ) space is a straight line with vertical intercept
(0, ρ) and slope equal to
µ
r
ρ
σ
r
. This is also illustrated in Figure 3.1. The value of this slope
is referred to as the price of risk in the M-V decision model. This price of risk represents
the extra expected return over the risk-free return that is earned by assuming an addi-
tional unit of risk as measured by the standard deviation of return. The opportunity ...
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Publisher Resources

ISBN: 9780444536853