Aversion
Definitions
- 1obsolete : the act of turning away
- 2a : a feeling of repugnance toward something with a desire to avoid or turn from it <regards drunkenness with aversion>
- b : a settled dislike : antipathy <expressed an aversion to parties>
- c : a tendency to extinguish a behavior or to avoid a thing or situation and especially a usually pleasurable one because it is or has been associated with a noxious stimulus
- 3: an object of aversion <inconstancy is my aversion — Jane Austen>
Description
Risk aversion is a concept in psychology, economics, and finance, based on the behavior of humans (especially consumers and investors) whilst exposed to uncertainty.
Risk aversion is the reluctance of a person to accept a bargain with an uncertain payoff rather than another bargain with a more certain, but possibly lower, expected payoff. For example, a risk-averse investor might choose to put his or her money into a bank account with a low but guaranteed interest rate, rather than into a stock that may have high returns, but also has a chance of becoming worthless.
Outside the rather mathematical fields of economics and finance, people have to make choices about how they face risks every day. Some have become very cautious, preferring to minimise risks even when the potential benefit of an action is large.
