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numerade.com
Suppose an investor has exponential utility function U(x)= -e^-a x and an initial wealth level of W. The investor is faced with an opportunity to invest an amount w ≤W and obtain a
Suppose an investor has exponential utility function U(x)= -e^-a x and an initial wealth level of W. The investor is faced with an opportunity to invest an amount w ≤W and obtain a random payoff x. Show that his evaluation of this incremental investment is independent of W.
Feb 3, 2022
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