The CARA and CRRA utility functions are both members of a more general class of utility functions…
The CARA and CRRA utility functions are both members of a more general class of utility functions called harmonic absolute risk aversion (HARA) functions. The general form for this function is where the various parameters obey the following restrictions: The reasons for the first two restrictions are obvious; the third is required so that U_ > 0.a. Calculate r (W) for this function. Show that […]