The effects of risk and risk aversion in the single-period inventory ("newsboy") problem are examined. Comparative-static effects of changes in the various price and cost parameters are determined and related to the newsboy's risk aversion. The addition of a random background wealth and of an...

We examine the effects of background risks on optimal portfolio choice. Examples of background risks include uncertain labor income, uncertainty about the terminal value of fixed assets such as housing and uncertainty about future tax liabilities. While some of these risks are additive and have...

Precautionary saving has been linked to the property of prudence, and the property of temperance has been used to show how the presence of an unavoidable risk affects one's behaviour towards a second risk. These two higher order risk effects also play key roles in aversion to negative skewness...

Although there has been much attention in recent years on the effects of additive background risks, the same is not true for its multiplicative counterpart. We consider random wealth of the multiplicative form x\~y\~, where x\~ and y\~ are statistically independent random variables. We assume...