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  1. Explain why a quadratic utility function

U(W) = W – bW2/2, b > 0 will imply that an investor’s utility function will be a function of the mean return and the variance of his portfolio. Show why this utility function implies decreasing risk-aversion.

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closed as off-topic by LocalVolatility, Chris Taylor, Bob Jansen Feb 6 at 10:16

This question appears to be off-topic. The users who voted to close gave this specific reason:

  • "Basic financial questions are off-topic as they are assumed to be common knowledge for those studying or working in the field of quantitative finance." – LocalVolatility, Chris Taylor, Bob Jansen
If this question can be reworded to fit the rules in the help center, please edit the question.

  • 2
    $\begingroup$ This seems like a homework question. What have you tried so far? $\endgroup$ – skoestlmeier Feb 6 at 7:05