Our study examines the behavior of a risk-averse investor who faces two sources of uncertainty: a random asset price … and inflation risk. Both sources of uncertainty make it difficult to stabilize consumption over time. However, investors … can enter risk-sharing markets, such as futures markets, to manage these risks. We develop a dynamic risk management model …

When measuring market risk, credit institutions and Alternative Investment Fund Managers may deviate from equally … weighting historical data in their Value-at-Risk calculation and instead use an exponential time series weighting. The use of … exponential weighting in the Value-at-Risk calculation is very popular because it takes into account changes in market volatility …

The prospect theory is one of the most popular decision-making theories. It is based on the S-shaped utility function …, unlike the von Neumann and Morgenstern (NM) theory, which is based on the concave utility function. The S-shape brings in … mathematical challenges: simple extensions and generalizations of NM theory into the prospect theory cannot be frequently achieved …

uncertainty. The firm faces additional sources of uncertainty that are aggregated into a background risk. We show that the firm … always chooses its optimal debt-equity ratio to minimize the weighted average cost of capital, irrespective of the risk …. When the background risk is either additive or multiplicative, we provide reasonable restrictions on the firm's preferences …

is not only risk averse but also regret averse. Regret-averse preferences are characterized by a modified utility … firm optimally increases (decreases) its futures position when the price risk possesses more positive (negative) skewness. …

distribution that captures the firm's uncertainty about which of the subjective beliefs govern the exchange rate risk. Ambiguity … profit conditional on each plausible subjective distribution of the exchange rate risk. Within this framework, we show that …

competitive firm that faces joint price and inflation risk. Given that the price risk is negatively correlated with the inflation … risk in the sense of expectation dependence, the firm optimally opts for an overhedge if the firm's coefficient of relative … risk aversion is everywhere no greater than unity. Furthermore, banning the firm from forward trading may induce the firm …

We examine risk taking when the bank's preferences exhibit smooth ambiguity aversion. Ambiguity is modeled by a second … return risk. Ambiguity preferences are modeled by the (second-order) expectation of a concave transformation of the (first …-order) expected utility of profit conditional on each plausible subjective distribution of the return risk. Within this framework, the …