Understanding Risk Aversion

These flashcards cover key concepts related to risk aversion and cash flow in financial decision-making.

Risk Averse

A trait indicating that individuals prefer to avoid risk and dislike the prospect of loss more than they value an equivalent gain.

Cash Flow

The net amount of cash being transferred into and out of a business, project, or financial product.

Pleasure vs. Pain Principle

The principle that suggests individuals will perceive the discomfort from losses more intensely than the satisfaction from equivalent gains.

Dislike of Bad Things

A behavioral tendency where individuals have a stronger reaction to negative outcomes compared to positive outcomes of the same magnitude.