rely on these probability measures. Downside risk neutral probabilities allow to value assets in a simple mean …The price of any asset can be expressed with risk neutral probabilities, which are adjusted to incorporate risk … preferences. This paper introduces the concepts of downside (respectively outer) risk neutral probabilities, which are adjusted to …

neutral measure, which is also a risk-adjusted measure. Using risk preference theory, we interpret this change in probability … utility functions and probability distributions. This probability measure, the ``downside risk neutral'' measure, is adjusted …We show that there exists a probability measure under which the CAPM formula for expected returns holds for general …

an increase in ambiguity is associated with increased investor activity. It also leads to a reduction in risk …

This note shows that a long term investor who faces considerable Knightian uncertainty about the future evolution of …

preferences and face model uncertainty with a common set of identifiable models. Aggregate endowment is ambiguous. We characterize …

-)variance of power plant profits. If investors are risk-averse, these differ- ences lead to divergent investment portfolios …, breaking the equivalence of price- and quantity-based policy instruments under risk-neutrality. Using the European power sector … diversification value of these assets. Uncertainty about the stringency of carbon taxes leads to lower shares of fossil fuel assets …

Heterogeneous beliefs among market participants can lead to questionable speculative trading that goes beyond any risk … pricing for ambiguous contracts, without compromising legitimate risk-hedging activities. While Arrow-Debreu equilibria …

Base rate neglect typically involves the underweighting of priors in a world with objective probability distributions … risk, is a rational strategy for ambiguity-averse individuals, who have an incentive to hedge the ambiguity in the base …

This paper deals with capital budgeting decisions under uncertainty. We present an Aggregate Return On Investment (AROI … which, compared with the risk-adjusted cost of capital, correctly signals wealth creation. For choosing between two mutually … exclusive projects, we derive an incremental AROI and an incremental risk-adjusted cost of capital, by means of which two …

their risk aversion parameter invest less in risky assets than wealthy investors with identical risk aversion uncertainty …We show that if an agent is uncertain about the precise form of his utility function, his actual relative risk aversion … may depend on wealth even if he knows his utility function lies in the class of constant relative risk aversion (CRRA …