We consider a financial market consisting of a nonrisky asset and a risky one. We study the minimal initial capital needed in order to super-replicate a given contingent claim under the Gamma constraint, i.e. a constraint on the unbounded variation part of the hedging porfolio. In the general...

We consider a stylized bond-equity economy, which though incomplete per se, has a rich enough set of assets available for trade such that given standard assumptions about behavior under uncertainty, the equilibrium allocation would arbitrarily approximate a complete market allocation. We show,...

This paper explores the consequences of non-additive expected utility on risk-sharing and equilibrium in a general equilibrium set-up. We establish that convexity of an agent's preferences (or strong uncertainty aversion) is equivalent to the convexity of his capacity and concavity of his...

Kinckerbocker (1973) introduced "oligopolistic reaction" to explain why firms follow rivals into foreign markets. We develop a model that incorporates the central features of Kinckerbocker's story -oligopoly, uncertainty, and risk aversion- to establish the conditions required to generate...

A usual argument in finance refers to no arbitrage opportunities for the positivity of the bid-ask spread. Here we follow the decision theory approach and show that if positivity of the bid-ask spread is identified with strong risk aversion for an expended utility market-marker, this is no...

Knickerbocker (1973) introduced "oligopolistic Reaction" to explain why firms follow rivals into foreign markets. We develop a model that incorporates the central features of Knickerbocker's stroy - oligopoly, uncertainty, and risk aversion - to establish the conditions required to generate...

This paper investigate the existence of asymmetric equilibria in a pure exchange economy with individual risks. The model is an extension of Malinvaud's (1973). Agents face identical pure individual risks: their endowments and utility functions only depend on their individual state; but there...

Cumulative prospect theory was introduced by Tversky and Kahneman to combine the empirical realism of their original prospect theory with the theoretical advantages of rank-dependent utility. Preference axiomatizations were provided in several papers. All exosting axiomatizations, however, only...

One may reason before making a decision on perceiving potential objections to expected utility-preference. Cognitive consistency is attained by making full use of available information, i.e. consistent preference and reasons. I show that coincidence between the rational choice and the normative...

In this paper, we show that the third inverse stochastic dominances introduced by Muliere and Scarsini (1989) is nicely connected with the Yaari's dual model. We show especially that the third inverse stochastic dominance is closely linked with the non-negativity of third derivative of the...