RISK-AVERSION, PRUDENCE AND TEMPERANCE - A UNIFIED APPROACH

Risk-aversion can be defined either by the negative sign of the second derivative of the utility function or by the rejection of any mean-pr eserving increase in risk. The more recent notions of prudence and tem perance have so far been defined exclusively by the sign of the third and the fourth derivative of the utility function. In this paper we sh ow that, as risk-aversion, prudence and temperance can also be interpr eted as systematic attitudes towards transformation of a density funct ion.