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 …’ prediction coefficient but makes that of the uninformed investors diminish. Inflation does not affect rational investors’ risk …

We study the pricing and hedging of derivative securities with uncertainty about the volatility of the underlying asset … "distance" to a reference local volatility model. In the limit for small uncertainty aversion, this leads to explicit formulas … for prices and hedging strategies in terms of the security's cash gamma …

In this paper we relate a bank’s choice between retail and wholesale liabilities to real economic uncertainty and the … shocks in the volume of bank assets, banks facing more intense uncertainty and more volatile loan demand tend to employ more … funding would limit funding uncertainty but will increase the exposure to asset-side shocks. …

The present paper considers a class of general equilibrium economics when the primitive uncertainty model features … uncertainty about continuous-time volatility. This requires a set of mutually singular priors, which do not share the same null … agents in the economy are heterogeneous in their preference for uncertainty. Each utility functional is a variational type …