Average-rate options, commonly known as Asian options, are contingent claims whose payoffs depend on the arithmetic average of some underlying index over a fixed time horizon. This paper proposes a new valuation technique, called the variable reduction technique, for average rate options. This...

We develop a multi-period model of stock trading in which investors receive differential information concerning the underlying value of the stock. Investors trade competitively in the market based on their own private information and the information revealed by the market clearing prices as well...

This paper finds out that the risk exposure of a trader subject to a VaR limit is always lower than that of an unconstrained trader and that the probability of extreme losses is also lower.

This paper constructs a representative agent supporting the equilibrium allocation in ¡°event-tree¡± economies with time-additive preferences and possibly incomplete securities markets. If the equilibrium allocation is Pareto optimal, this construction gives the usual linear welfare...