the risk that can be diversified. Not surprisingly, simple examples show that this approach is typically inconsistent for … risk adverse agents. We show that it can nevertheless be recovered asymptotically when the number of sold claims goes to … infinity and the absolute risk aversion of the agent goes to zero simultaneously. This follows from a general convergence …

exogenous risk, which are optimally hedged by investment in a given financial market with respect to exponential preferences. In …

This paper studies the problem of optimal investment with CRRA (constant, relative risk aversion) preferences, subject … to dynamic risk constraints on trading strategies. The market model considered is continuous in time and incomplete …; furthermore, financial assets are modeled by Itô processes. The dynamic risk constraints (time, state dependent) are generated by …

price a given asset : the arbitrage approach through the existence of a risk-neutral density, the utility approach through a …

risk aversion coefficient decreases (increases) the interest rate. Also, the interest rate rises when capitalists are less … risk-averse and financial intermediaries are hit by a liquidity shock. …

This paper reconsiders the theory of existence of efficient allocations and equilibria when consumption sets are … unbounded below under the assumption that agents have incomplete preferences. Our model is motivated by an example in the theory … of assets with short-selling where there is risk and ambiguity. Agents have Bewley’s incomplete preferences. As an …

The theory of existence of equilibrium with short-selling is reconsidered under risk and ambiguity modelled by risk … averse variational preferences. No-arbitrage conditions are given in terms of risk adjusted priors. A sufficient condition … for existence of efficient allocations is the overlapping of the interiors of the risk adjusted sets of priors or the …