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 …

This study is concerned with establishing the determinants of banks' exposure to risk and with predicting risk in … banking. Using the COMPUSTAT data base, prediction rules have been developed for two aspects of risk: systematic risk (risk … that is related to covariance with the market portfolio) and residual risk (the aggregate of specific risk and extra …

risk is the dominant force, the size distribution of disasters follows a power law, and the economy has a representative … difference between the power-law tail parameter and the coefficient of relative risk aversion, γ. The options-pricing formula …

The Centers for Medicare and Medicaid Services (CMS) has phased in the Hierarchical Condition Categories (HCC) risk … beneficiary's health status. However, it is debatable whether the CMS-HCC model has led to strategic evolutions of risk selection …. We examine the competing claims and analyze the risk selection behavior of MA plans in response to the CMS-HCC model. We …

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 …

options in defined contribution retirement plans. We document large differences in realized TDF returns and risk profiles … reflects optimal risk-taking by fund families with low market share, especially those entering the market after 2006. Using … plan-level data, we find little evidence that 401(k) plan sponsors match the risk profile of the TDFs in their plans to the …

national economy. It is based on the modern theory and practice of contingent claims analysis (CCA), which is successfully used … today at the level of individual banks by managers, investors, and regulators. The basic analytical tool is the risk … to quantifying the effects of asset-liability mismatches within and across institutions. Risk-adjusted CCA balance sheets …

with endogenous solvency constraints. These solvency constraints are such as to prevent default at the cost of reduced risk … kernel, and compare it to the one for economies without participation constraints: interest rates are lower and risk premia …