Investors in equilibrium are modeled as facing investor specific risk exposures arising from incomplete diversification of personal risks across the space of assets. Personalized asset pricing models reflect these risks. Averaging across the pool of investors we obtain a market asset pricing...

Investors in equilibrium are modeled as facing investor specific risks across the space of assets. Personalized asset pricing models reflect these risks. Averaging across the pool of investors we obtain a market asset pricing model that reflects market risk exposures. It is observed on invoking...

Investors in equilibrium are modeled as facing investor specific risks across the space of assets. Personalized asset pricing models reflect these risks. Averaging across the pool of investors we obtain a market asset pricing model that reflects market risk exposures. It is observed on invoking...

Contingent claims with payoffs depending on finitely many asset prices are modeled as a separable Hilbert space. Under fairly general conditions, including market completeness, it is shown that one may change measure to a reference measure under which asset prices are Gaussian and for which the...

Contingent claims with payoffs depending on finitely many asset prices are modeled as a separable Hilbert space. Under fairly general conditions, including market completeness, it is shown that one may change measure to a reference measure under which asset prices are Gaussian and for which the...

The Financial Crisis accelerated a latent Fiscal Crisis that had been brewing in many Western countries. The paper outlines the causes of the Financial Crisis, and how this increased expenditure and reduced revenues for many Western governments. But these additional fiscal stresses merely...

An argument for adjusting Black Scholes implied call deltas downwards for a gamma exposure in a left skewed market is presented. It is shown that when the objective for the hedge is the conservation of capital ignoring the gamma for the delta position is expensive. The gamma adjustment factor in...

This paper establishes a theoretical model to examine the LOLR policy when a central bank cannot distinguish between solvent and insolvent banks. We study two cases: a case where the central bank cannot screen insolvent banks and a case where the central bank can only imperfectly screen...

This paper studies contagion and market freezes caused by uncertainty in financial network structures and provides theoretical guidance for central banks. We establish a formal model to demonstrate that, in a financial system where financial institutions are interconnected, a negative shock to...