The paper uses a Walrasian two-period financial market model with informed and uninformed constant absolute risk averse (CARA) rational investors and noise traders. The investors allocate their initial wealth between risky assets and risk-free fiat money. The analysis concentrates on the effects...

In this paper we consider the problem of an insurance company where the wealth of the insurer is described by a Cramér-Lundberg process. The insurer is allowed to invest in a risky asset with stochastic volatility subject to the influence of an economic factor and the remaining surplus in a...

This paper analyzes empirical market utility functions and pricing kernels derived from the DAX and DAX option data for three market regimes. A consistent parametric framework of stochastic volatility is used. All empirical market utility functions show a region of risk proclivity that is...

We lay out an empirical and a theoretical model to analyze the effects of non-fundamental exchange rate volatility on economic activity and welfare. In the first part of the paper, the GARCH-SVARmodel is applied to measure empirically the effect of the conditional exogenous exchange rate...