In this article we analyze the risk attitude of a group of heterogeneous agents and we develop a theory of comparative collective risk tolerance. In particular, we characterize how shifts in the distribution of individual levels of risk tolerance affect the group’s attitude towards risk. In a...

Why do investors keep different opinions even though they learn from their own failures and successes? Why do investors keep different opinions even though they observe each other and learn from their relative failures and successes? We analyze beliefs dynamics when beliefs result from a very...

In this paper we extend the theory of precautionary saving to the case in which uncertainty is multidimensional and we develop a matrix-measure of multivariate prudence. Furthermore, we characterize comparative prudence, decreasing and increasing prudence, the effect of uncertainty on the...

We consider a model in which any investment opportunity is described in terms of cash flows. We don't assume that there is a numéraire, enabling investors to transfer wealth through time; the time horizon is not supposed to be finite and the investment opportunities are not specifically related...

In this paper, we study securities market models with fixed costs. We characterize the absence of arbitrage opportunities and we provide fair pricing rules. We then apply these results to extend some popular interest rate and option pricing models, which present arbitrage opportunities in the...

In this paper we study the stability (in the L^{p} as well as for the almost sure convergence sense) of the optimal investment-consumption strategy with respect to the choice of the utility function.

Kimball, 1990a and Kimball, 1990b established that income risk increases the marginal propensity to consume if and only if absolute prudence decreases. We characterize decreasing and increasing multivariate prudence and show that a multidimensional risk increases the marginal propensity to...

This paper derives the properties of the discount rate that should be applied to a public-sector project when the affected population has heterogeneous degrees of impatience. We show that, for any distribution of discount rates, the social discount rate has the following properties: it decreases...

We consider in this paper two Markovian processes X and Y , solutions of a stochastic differential equation with jumps, that are comonotonic, i.e., that are such that for all t , almost surely, Xt is greater in one state of the world than in another if and only if the same is true for Yt . This...