Besides the use of utility function, risk aversion may also be analysed with the help of uncertainty equivalents, which are applied in the case of games of chance.
The uncertainty equivalent of games of chance is defined as the monetary amount that makes the investor indifferent between certainty and a game of chance.
A unit trust certificate is a security to which is tied the holder’s right to an aliquot hare in the assets of the unit trust fund and the right to share in the returns on these assets.
The settlement company UNIVYC, a. s. is a 100% subsidiary company of the PSE. It is responsible for the settlement of operations in stock, for keeping asset accounts of the members of the stock exchange and for keeping a record of securities negotiated in the stock exchange.
Direct participants in the settlement of operations with securities in the stock exchange and outside of the stock exchange are at present all the members of the stock exchange, who are entitled to purchase and sell securities at the stock exchange.
Direct participants in settlements are the mediating element between their clients and the settlement company.
The utility function is the dependence between utility (i.e. a subjective value) and the final value from the investment.
Under otherwise equal conditions, all rational investors prefer greater utility to lower utility. Their utility function is upward-sloping.
With investors averse to risk, every further crown of yield represents a permanently decreasing utility. If the first crown of yield represents a unit of utility, the second crown of yield corresponds to a utility lower than the unit etc. – its utility function is concave.
With investors neutral to risk, every additional crown of yield represents the same additional amount of utility, which the linear utility function corresponds to.
With investors seeking risk, every additional crown of yield represents a steadily increasing additional amount of utility and the utility function is convex.