In an exchange economy in which there is a complete set of markets for macroeconomic risks but no market for idiosyncratic risks, we consider how the efficient risk-sharing rules for the macroeconomic risk are affected by the heterogeneity in the consumers' risk attitudes and idiosyncratic...

We provide necessary and sufficient conditions on an individual's expected utility function under which any zero-mean idiosyncratic risk increases cautiousness (the derivative of the reciprocal of the absolute risk aversion), which is the key determinant for this individual's demand for options...

We prove that every continuous-time model in which all consumers have time-homogeneous and time-additive utility functions and share a common probabilistic belief and a common discount rate can be reduced to a static model. This result allows us to extend some of the existing results on the...

We study the representative consumer's risk attitude and efficient risk-sharing rules in a singleperiod, single-good economy in which consumers have homogeneous probabilistic beliefs but heterogeneous risk attitudes. We prove that if all consumers have convex absolute risk tolerance, so must the...

The papers in this special issue of Mathematics and Computers in Simulation cover the following topics: improving judgmental adjustment of model-based forecasts, whether forecast updates are progressive, on a constrained mixture vector autoregressive model, whether all estimators are born equal:...

This paper studies a Monte Carlo algorithm for computing distributions of state variables when the underlying model is a Markov process. It is shown that the L1 error of the estimator always converges to zero with probability one, and often at a parametric rate. A related technique for computing...

In this paper, we provide a framework to evaluate finite sample MSE of several realized covariance estimators when using nonsynchronous observations contaminated with microstructure noise. This framework enables us to examine different estimators. We propose some estimators as an application of...

In a continuous-time economy with complete markets, we study how the heterogeneity in the individual consumers' risk tolerance and impatience affects the representative consumer's risk tolerance and impatience. We derive some formulas, which indicate that the representative consumer's impatience...

We present a model of incomplete information games with sets of priors. Upon arrival of private information, each player "updates" by the Bayes rule each of priors in this set to construct the set of posteriors consistent with the arrived piece of information. Then the player uses a possibly...

This paper considers a two agent model of trade with multiple priors. First, we characterize the existence of an agreeable bet on some event in terms of the set of priors. It is then shown that the existence of an agreeable bet on some event is a strictly stronger condition than the existence of...