expected utility (GEU) to the diversification of agents who maximize the conventional expected utility (EU). Specifically, we … derive the patterns of diversification for agents who maximize a rank-dependent' expected utility, attaching more weight to … bad' than to good' outcomes, in contrast to the probability weights used in a conventional expected utility maximization …

constant elasticity of intertemporal substitution is assumed but the risk-preference component of utility is restricted only by …This paper considers a representative agent model of asset prices based on a recursive utility specification. A … semiparametric recursive utility model for the one-step ahead joint probability distribution for consumption growth and asset returns …

"social risk management" motive: projects that ameliorate market failures when household marginal utility is high are …In this paper, we develop a new model for government cost-benefit analysis in the presence of risk. In our model, a … appealing. The second friction is that government financing is costly because of tax distortions. This creates a "fiscal risk …

Value at Risk has become the standard measure of market risk employed by financial institutions for both internal and … methodologies developed so far give satisfactory solutions. Interpreting Value at Risk as a quantile of future portfolio values … assumptions invoked by existing methodologies (such as normality or i.i.d. returns). The Conditional Value at Risk or CAViaR model …

The foreign exchange risk premium in an exchange rate target zone regime with devaluation/realignment risks is derived … devaluation/realignment risk, is taken into account. The risk premium is then the sum of two separate risk premia, arising from … real and nominal exchange rate premia are considered. The real and nominal risk premia from movements within the band are …

adjusted to take account of future asset price risk. Some empirical calculations suggest that these adjustments are large, and …

a simple extension of the long-run risk model …

While the traditional view of financial innovation emphasizes the risk sharing role of new financial assets, belief …. This paper investigates the effect of financial innovation on portfolio risks in an economy when both the risk sharing and … the possibilities for risk sharing. My main result shows that financial innovation also always increases the speculative …

This paper studies the pricing of volatility risk using the first-order conditions of a long-term equity investor who …

help to explain the enormous counter-cyclical volatility of aggregate risk compensation in financial markets. To answer … this question, we set up a model in which CRRA-utility investors have heterogeneous trading technologies. In our model, a … these intermittent re-balancers more than double the effect of aggregate shocks on the time variation in risk premia by …