Finance School of Management Risk Aversion A characteristic of an individuals preference in risk-taking situations Experiment Prefer lower risk given same expected value Decreasing marginal utility of income Rational behavior assumed to be risk-averse .o a measure of willingness to pay to reducing risk uesTc5 Finance School of Management Risk Aversion ❖ A characteristic of an individual’s preference in risk-taking situations − Experiment ❖ Prefer lower risk given same expected value ❖ Decreasing marginal utility of income ❖ Rational behavior assumed to be risk-averse ❖ A measure of willingness to pay to reducing risk