Abstract
Price of risk and rationality The price of risk is a notion which people often perceive as a vague one. Yet, the relevant concept is a very precise one, which the theory of rational decision making has developed for a quarter of a century, as this survey article recalls. Economic theory as well as financial theory suggest evaluating techniques of risky projects which are consistent between themselves and are consistent too with the price of risk concept. Opposite opinions emerge now and then, but contain errors, as the article argues and explains in the light of recent results of specialized research. Nevertheless, practical as well as theoretical considerations have lead to generalizations of those concepts based on experimental research on rationality under risk and on the development of markets, in particular of financial markets. The aim of this article is to present such generalizations without rejecting the bulk of theoretical achievements in this domain.
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