uncertainty. The firm faces additional sources of uncertainty that are aggregated into a background risk. We show that the firm … always chooses its optimal debt-equity ratio to minimize the weighted average cost of capital, irrespective of the risk …. When the background risk is either additive or multiplicative, we provide reasonable restrictions on the firm's preferences …

Within the prospect theory the paper examines production and hedging decisions of a competitive firm under price … uncertainty. We consider the prospect theory for the firm's utility function in the two moment model known as (mu … theory, mean-variance model, price uncertainty …

The prospect theory is one of the most popular decision-making theories. It is based on the S-shaped utility function …, unlike the von Neumann and Morgenstern (NM) theory, which is based on the concave utility function. The S-shape brings in … mathematical challenges: simple extensions and generalizations of NM theory into the prospect theory cannot be frequently achieved …