The behavioral finance literature cites the frozen concentrated orange juice (FCOJ) futures market as a prominent example of the failure of prices to reflect fundamentals.(...)

We prove the existence of Pareto optimal allocations within sets of acceptableallocations when decision makers have probabilistic sophisticated variational pref-erences dened on random endowments in L1.[...]

Limited liability creates a conict of interests between policyholders and shareholders ofinsurance companies. It provides shareholders with incentives to increase the risk of theinsurer's assets and liabilities which, in turn, might reduce the value policyholders attach toand premiums they are...

The abolition or reform of unfunded pensions will generally make members of a transitional generation worse-off, because of the "double burden" of funding their own retirement along with that of paying off the unfunded pension liability. Reform will also lower the time-path of interest rates,...

We extend the simple model of voluntary public good provision toallow for two or more public goods, and explore the new possibilitiesthat arise in this setting. We show that, when there are many publicgoods, voluntary contrib...

Derivative financial instruments are frequently used as a tool for influencing the risk ofentrepreneurial uncertain payoff. To this end, an approximation procedure is developed capable ofcalculating the optimal quantity of derivatives to be used. It is assumed that the entrepreneurial cashflow...

In this paper, we examine an exchange economy with a financial market composed of three assets: a share of a stock, an European call option written on the stock, and a riskless bond.

This paper develops a principal-agent model of financial contracting in which optimal contracts resemble a combination of debt and equity. When defaulting on debt, the firm is punished by disruption of external funding. Such contracts however, invite rivals to compete more aggressively to...

This paper deals with the introduction of stock options in an (dy-namically) incomplete securities market.

We develop a new approach to pricing and hedging contingent claims in incomplete markets framework the no-arbitrage arguments that have been developed in complete markets leads us to defining the concept we are able to extend the no-arbitrage ideo to a world of incomplete markets in such a way...