Risk-taking behaviour is a definition of risk-taking and comes in many forms depending on the area of the study Shapira. The principal theory of risk-taking decision is the expected utility theory. Model below represent the risk attitude shapes and the utility of function which underlines a persons financial decision making based on there confidence level. However below is a utility function, which is a graph diagram with the utility being the y-axis and value is...
Risk-taking behaviour is a definition of risk-taking and comes in many forms depending on the area of the study Shapira. The principal theory of risk-taking decision is the expected utility theory. Model below represent the risk attitude shapes and the utility of function which underlines a persons financial decision making based on there confidence level. However below is a utility function, which is a graph diagram with the utility being the y-axis and value is the x-axis, such as money and wealth.
Individuals who have a tendency to take fewer risks are often defined as risk averse, and this will be the left hand graph, which has a dipped utility function. This means the player will gain less utility from an uncertain option with an expected value of x, compared to an option with a certainty value. Further, a risk neutral would be if an individual is between certain and uncertain option with their expected value being x.