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Figure 13.1 Risk aversion and the cost of risk bearing

Figure 13.1 Risk aversion and the cost of risk bearing. U. U(Y). U(Y 2 ). B. E. U(E[Y]). D. E(U). C. A. U(Y 1 ). 0. Y. Y*. Y 1. Y 2. Y**. Figure 13.2 Risk aversion, option price and option value. U. U(Y). U(A). A. C. N. U(N). 0. Y. Y*. Y N. Y A. Y**.

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Figure 13.1 Risk aversion and the cost of risk bearing

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  1. Figure 13.1 Risk aversion and the cost of risk bearing U U(Y) U(Y2) B E U(E[Y]) D E(U) C A U(Y1) 0 Y Y* Y1 Y2 Y**

  2. Figure 13.2 Risk aversion, option price and option value U U(Y) U(A) A C N U(N) 0 Y Y* YN YA Y**

  3. Figure 13.3 Alternative ways of identifying maximum net benefit (a) MC(A) MB(A) A* A (b) NB(A) A* A (c) A A* MNB(A)

  4. Figure 13.4 Irreversibility and development with future known (a)   A1 c a (b)  b h  MNB1 g d   i e f    A2 MNB2

  5. Figure 13.5 Irreversibility and development with imperfect future knowledge (a)    A1 (b) MNB1     A2

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