This paper proposes a novel way of pricing S&P500 index options in the presence of jump risk. Our analysis is built upon an equilibrium option pricing rule for a representative agent economy. In particular, we use the weighted utility's certainty equivalent to specify agent's risk preference,...

This paper presents the shadow Capital Asset Pricing Model (CAPM) of Ma (2011a) as an intertemporal equilibrium asset pricing model, and tests it empirically. In contrast to the classical CAPM - a single factor model based on a strong behavioral or distributional assumption, the shadow CAPM can...

This paper is on decision theoretical foundations for various types of VaR models, including VaR and conditional-VaR, as objective measures of downside risk for financial prospects. We establish the connections of the VaRs with the first- and the second-order stochastic dominance investment...