Suppose an investor has exponential utility function U(x) = −exp(−ax) and an initial wealth level of...

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Suppose an investor has exponential utility function U(x) = −exp(−ax) and an initial wealth level of...

Suppose an investor has exponential utility function U(x) = −exp(−ax) 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.

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To evaluate the incremental investment, we will compare the investment versus not making the investment. E[U(W – w+x)] is the

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Suppose an investor has exponential utility function U(x) = −exp(−ax) and an initial wealth level of...

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Suppose an investor has exponential utility function U(x) = −exp(−ax) and an initial wealth level of...