What Is a Risk Neutral Person?

Risk neutral is a term used to describe the attitude of an individual who may be evaluating investment alternatives. If the individual focuses solely on potential gains regardless of the risk, they are said to be risk neutral. Such behavior, to evaluate reward without thought to risk, may seem to be inherently risky.

What is risk neutral examples?

For example, a risk-neutral investor will be indifferent between receiving $100 for sure, or playing a lottery that gives her a 50 percent chance of winning $200 and a 50 percent chance of getting nothing. Both alternatives have the same expected value; the lottery, however, is riskier.

What is a risk neutral agent?

A risk neutral party's decisions are not affected by the degree of uncertainty in a set of outcomes, so a risk neutral party is indifferent between choices with equal expected payoffs even if one choice is riskier. For example, if offered either or a chance each of and. , a risk neutral person would have no preference.