A general index of inherent risk

Abstract

We extend the pioneering work of Aumann and Serrano by presenting an index of inherent riskiness of a gamble having the desirable properties of their index, while being applicable to gambles with either positive or negative expectations. As such, our index provides a measure of riskiness which is of use for both risk lovers and risk aversive gamblers, and is defined for all discrete and a large class of continuous gambles. We analyze abstract properties of our index, and present in addition three empirical applications- roulette, horse betting market and US options traded on financial stocks between 2005 and

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