In a model of asset markets with transaction costs, we find a sufcient condition for an increase in transaction costs to increase buying prices, decrease selling prices, decrease the trading volume, and make all active investors worse off. The sufficient condition is met by all CARA utility...

In an exchange economy under uncertainty populated by consumers having constant and equal relative risk aversion but heterogeneous probabilistic beliefs, we analyze the nature of the representative consumer's probabilistic belief and discount rates. We prove a formula that implies that the...

In an exchange economy under uncertainty with two periods, one physical good, and finitely many states of the world, we show that for every (complete or incomplete) market span there exists a sequence of securities such that if they are introduced into markets one by one, the prices of any...

We study the optimal portfolio choice problem of an investor who is averse to both risk and ambiguity. Using the class of utility functions proposed by Klibano, Marinacci, and Mukerji (2005), we establish a generalized mutual fund theorem, which shows that there are a xed number of mutual funds...

We formulate the pension fund's problem of choosing optimal pension schemes in an inflnite, discrete-time setting as a sequence of Nash bargaining problems in which the members (contributors) of the fund are the bargainers and the disagreement points are determined by the utility levels they can...

We provide necessary and sufficient conditions on an individual's expected utility function under which any zero-mean idiosyncratic risk increases cautiousness (the derivative of the reciprocal of the absolute risk aversion), which is the key determinant for this individual's demand for options...

In an exchange economy in which there is a complete set of markets for macroeconomic risks but no market for idiosyncratic risks, we consider how the efficient risk-sharing rules for the macroeconomic risk are affected by the heterogeneity in the consumers' risk attitudes and idiosyncratic...

We consider an exchange economy under uncertainty, in which agents' utility functions exhibit constant absolute risk aversion, but they may be recursive and the expected utility calculation may be based on multiple subjective beliefs. The risk aversion coefficients, subjective beliefs,...

In a model of a two-period exchange economy under uncertainty, we find both upper and lower bounds for the risk free interest rate when the agents' utility functions exhibit constant absolute risk aversion. These bounds are independent of the degree of market incompleteness, and so in particular...

In an exchange economy under uncertainty with two periods, one physical good, and finitely many states of the world, we show that for every (complete or incomplete) market span there exists a sequence of securities such that if they are introduced into markets one by one, the prices of any...