utility theory

Logarithmic Wealth Utility

The previous post (Utility Function of Wealth) discussed and described the typical general shape of the utility function of wealth, and touched on some applications. Here, we will consider a special case, with an exact curve. Consider a rational trader – a trader that is emotionally detached from his account, and whose objective is to […]

Utility Function of Wealth

It is often assumed that wealth has linear utility. For example, it is taken for granted that $2 is worth exactly double of $1. In most real-world scenarios, where the amount of wealth available is finite, this is not exactly true. Imagine, for example, three travellers in identical situations, except Traveller A has $2000 Traveller […]

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