Question: Suppose a consumer with wealth W which is distributed according to a density law of probability fw(). Show that one can obtain an approximation of

Suppose a consumer with wealth W which is distributed according to a density law of probability fw(). Show that one can obtain an approximation of the cost of risk, CR, using: CR 1/2 rr (w) CVw w where rr() is the coefficient of relative risk aversion measured at , w is the mean of the richness, CVw, its coefficient of variation and w, its standard deviation.

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