Finance School of management Risk aversion Prefer lower risk given same expected value .o Diminishing marginal utility of income .o a measure of willingness to pay to reducing risk o A characteristic of one's preference in risk-taking situations Rational behavior assumed to be risk-averse uesTc5 Finance School of Management Risk Aversion Prefer lower risk given same expected value ❖ Diminishing marginal utility of income ❖ A measure of willingness to pay to reducing risk ❖ A characteristic of one’s preference in risk-taking situations ❖ Rational behavior assumed to be risk-averse