Abstract
We identify new conditions ensuring risk aversion in the sense of Arrow-Pratt in a two-argument utility framework where a financial risk is accompanied by a background risk. The results generalize the findings by Finkenstal et al (1999), by considering the case of high-order expectation dependence and of high-order two-variable risk apportionment. We also provide three empirical applications to exhibit high-order expectation dependence are quiet important in determining risk aversion with two risks.
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