This paper describes a pure-exchange, continuous-time economy with two heterogeneous agents and complete markets. A novel feature of the economy is that agents perceive some security returns as ambiguous in the sense often attributed to frank Knight. The equilibrium is described completely in...

Existing models in stochastic continuous-time settings assume that beliefs are represented by a probability measure. As illustrated by the Ellsberg Paradox, this feature rules out a priori any concern with ambiguity. This paper formulates a continuous-time intertemporal version of...

Living with risk can lead to anticipatory feelings such as anxiety or hopefulness. Such feelings can a¤ect the choice between lotteries that will be played out in the future - choice may be motivated not only by the (static) risks involved but also by the desire to reduce anxiety or to promote...