Abstract This paper considers a model of spatial allocation of investment capital under uncertainty. We demonstrate that the spatial concentration of economic activity depends upon properties of risk preferences deeper than risk aversion. The degree of so-called relative prudence unambiguously...

We use a model of a bank under perfect competition to examine effects of derivatives for tradeable and non tradeable risks on optimal bank behavior in the deposit and loan markets. If both credit risk and interest risk are tradeable, we identify simple decision rules which require only market...

We derive a class of utility functions that are equivalent with respect to a well-defined functional form. We apply a general view of constant relative risk aversion to investigate on different equivalence relations. Then we compare our results with standard applications in economics and finance.

Using the industrial economics approach to the microeconomics of banking we analyze a large bank under credit risk. Our aim is to study how a risky loan portfolio affects optimal bank behavior in the loan and deposit markets, when credit derivatives to hedge credit risk are available. We examine...