Arrow-Pratt Aversion

Problem

Compute the Arrow-Pratt absolute risk aversion for CRRA utility.

For u(c) = c ** (1 - gamma) / (1 - gamma), the coefficient -u''(c) / u'(c) equals gamma / c. Return that value.

Hint

Absolute risk aversion decreases as wealth rises for CRRA utility.

case 1

in: [10,2]

expected: 0.2

case 2

in: [5,1]

expected: 0.2

case 3

in: [2,0.5]

expected: 0.25

Starter codePython

def arrow_pratt_aversion(c, gamma):
    # Your code here
    pass

3 test cases · run your code against them in the editor