We propose a general framework for the analysis of dynamic optimization with risk-averse agents, extending Whittle's (Whittle, 1990) formulation of risk-sensitive optimal control problems to accommodate time-discounting. We show how, within a Markovian set-up, optimal risk-averse behavior is...

Risk aversion is a key element of utility maximizing hedge strategies; however, it has typically been assigned an arbitrary value in the literature. This paper instead applies a GARCH-in-Mean (GARCH-M) model to estimate a time-varying measure of risk aversion that is based on the observed risk...

Due to ongoing efforts for decarbonization, electricity markets worldwide are undergoing fundamental transitions, which result in increased uncertainty for all market participants. Against this background, we investigate the impact of risk aversion on investment and market operation in markets...