The problem of pricing derivative financial products is central to the theory of capital markets. An option is a financial contract conveying its owner the right of buying or selling a financial asset (underlying asset) at a preset strike price K, at a fixed expiration date T (maturity). Unlike...

In this paper we analyze recent trends in aggregate property crime rates in the United States. We propose a dynamic equilibrium model which guides our quantitative investigation of the major determinants of observed patterns of crime. Our main findings can be summarized as follows. First, the...

The following result clarifies when preferences over time and under risk correspond to discounting and are not risk neutral. If a binary relation on a real vector space V satisfies four axioms, then there is a utility function U=fu from V to R where u from V to R is linear as a map of vector...

There is a large literature which explores how negative income shocks impact human capital accumulation (especially education) when financial markets are incomplete and households can neither insure nor borrow to smooth their consumption. The main conclusion is that households in these...

We examine empirically the relationship between happiness and the ethical decisions of individuals. We use data from the 1995-97 wave of the World Values Survey (WVS) to test the hypothesis that the relationship between happiness and ethics is bicausal in the sense that personal ethics affects...

Consider a binary relation on a real vector space of vector-valued discrete-time stochastic processes. If the binary relation satisfies four axioms, then there are unique discount factors such that preferences regarding stochastic processes induce prefences among present value random vectors....

We derive an inter-temporal theory of changing tastes from the normative primitives defined in Sagi (1998). Using a notion of time consistency we establish several interesting results: (i) the set bounding agents' potential tastes shrinks (weakly) with time, (ii) non-linear induced preferences...

This paper extends existing insurance results on the type of insurance contracts needed for insurance market efficiency to a dynamic setting. I extend the notion of insurable risks and define them in terms of the actuarial properties of the underlying risk process (independently of preferences...

This study adopts an ex-post facto research design to empirically examine the effect of insecurity on capital market performance and economic growth on Nigeria. Using data on peace index (PINDEX) and Peace Score (PSCORE) as proxy for insecurity, market capitalization as proxy for capital market...

This paper explores how a principal with time-inconsistent preferences invests optimally in technology or capital. If the current principal prefers her future self to save more, she can increase current investments complementary to future savings and decrease investments in the strategic...