Differentiate the following terms/concepts: a. Prospect and probability distribution b. Risk and...

Question

Differentiate the following terms/concepts:

a. Prospect and probability distribution

b. Risk and uncertainty

c. Utility function and expected utility

d. Risk aversion, risk seeking, and risk neutrality

David · Accepted Answer

:  
Prospect: A probability and chances for future success or a possibility for future occurring.
Probability distribution : It is the statistical function that gives us all the possible future outcomes. The simplest 
example is a coin flip. When you flip a coin there are only two possible outcomes, the result is either heads or tails. 
And so, the probability of getting heads is 1 out of 2, or ½, or 50%.
b. Risk:

Differentiate the following terms/concepts: a. Prospect and probability distribution b. Risk and uncertainty c. Utility function and expected utility d. Risk aversion, risk seeking, and risk...

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