We observe that the standard variant of Prospect Theory cannot describe very risk-averse choices in simple lotteries. This makes it diffcult to accommodate it with experimental data. Using an exponential value function can solve this problem and allows to cover the whole spectrum of risk-averse...

This paper studies the role of strategy and the order book mar-ket mechanism in price dynamics and the order flow behaviour. To this end we analyse a zero-intelligence agent model of a dynamic limit order market. Stylised facts of limit order markets are shown to be influenced and, in some...

This paper introduces an expected value estimator with expert knowledge to the robust estimation of sovereign rating transitions which are characterised by few observations. Ourestimates of default premia within Mexican, Colombian and Brazilian Eurobond yield spreads provide a better fit than...

Crack and Ledoit (1996) discover the compass rose of stock returns, generated by discrete stock prices and additional assumptions concerning the level and variation of stock prices. They raise the question, whether this phenomenon does introduce predictable structures in stock returns. In...

Prospect theory has found an increasing attention in many fields of economics. However, it has scarcely been addressed in a macroeconomic growth model. In an earlier paper we introduced prospect theory into a stochastic growth model. This paper focuses on linking the Euler equation induced by...