We present a theory of choice among lotteries in which the decision maker's attention is drawn to (precisely defined … payoffs, our model provides a novel and unified account of many empirical phenomena, including frequent risk-seeking behavior … distinguish it from Prospect Theory, which we test. We also use the model to modify the standard asset pricing framework, and use …

enough to approximate Kahnenman and Tversky's prospect theory and that for certain parametric values will yield the expected …

featuring consumption externalities, recursive utility, and jump risk …

between consumption losses in a disaster and the risk premium, a small amount of risk sharing can significantly attenuate the … effect that disaster risk has on the equity premium. We characterize the sensitivity of risk premium to wealth distribution … lead to significant variation in disaster risk premium. It also highlights the conditions under which disaster risk premium …

stance. When decomposing the VIX into two components, a proxy for risk aversion and expected stock market volatility … ("uncertainty"), we find that a lax monetary policy decreases both risk aversion and uncertainty, with the former effect being …

distributions of risks give rise to components of equilibrium prices that differ from the risk prices widely used in asset pricing … theory. A quantitative example highlights a representative investor's uncertainties about the size and persistence of …

We study a dynamic-contracting problem involving risk sharing between two parties -- the Proposer and the Responder … wealth in the risky asset, but they can share the underlying investment and termination risk. When the project ends they … consume their final accumulated wealth. The Proposer and the Responder have constant relative risk aversion R and r …

prove that if the more "productive" agents are also more risk-tolerant (as holds in the sample of individuals we surveyed …-outcome risky budget. When, at very low allocations, the ratio of the more risk-averse type's marginal utility to that of the other …