Risk Neutral


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Risk Neutral

A situation in which an investor effectively ignores risk in making investment decisions. Given two investments with different levels of riskiness, a risk neutral investor considers only the expected return from each investment. As such, being risk neutral differs significantly from both risk aversion and risk seeking.
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The only step in the existence proof that differs from the risk neutral case considered by Dasgupta and Maskin [1986b] is in showing that [[[sigma].sup.N].sub.i=1] [U.sup.i](a), where a = ([a.sup.1],...,[a.sup.N]) is the vector of agents' locations, or pure strategies, and [U.sup.i](.)'s are individual utilities as functions of locations, is upper semicontinuous in its arguments.
The remaining individuals are considered risk neutral. These division values are arbitrary.
With risk neutral firms and risk-averse workers, the presence of moral hazard in search behavior will induce contracts in which the firm bears some but not all of the risk of uncertain unemployment spell duration.