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@jemoka / Jemoka Knowledge Base / wiki/concepts/utility_function.md
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--- title: "utility function" type: concept related: [Power Utility, Expected Utility Of Wealth] source: https://www.jemoka.com/posts/kbhutility_function/ confidence: high status: active --- quadratic utility \begin{equation} U(x) = \lambda x - x^{2} \end{equation} where, \(\lambda>0\) controls risk aversion: as risk increases, utility increases concavely, then eventually utility falls exponential utility \begin{equation} U(x) = 1 - e^{-\lambda x} \end{equation} where \(\lambda >0\) controls risk aversion. This is usually not plausible as utility because people’s utility doesn’t grow exponentially ever power utility see power utility