We examine the conditions for preferences and risks that guarantee monotonicity of equilibrium derivative prices. In a Lucas economy with a derivative, we derive the equilibrium derivative price under expectation with respect to risk-neutral probability, and analyze comparative statics on the...

For single-period complete financial asset markets with representative investors, we introduce a bull market measure for uncertain state occurrence and its associated ordering between representative investors in markets based on their marginal rate of substitution between equilibrium consumption...

The goal of this paper is the examination of the conditions on preferences to guarantee the monotonicity of asset prices, when their returns change in the sense of first- and second-order stochastic dominances.

This note gives sufficient conditions of cross risk vulnerability introduced by Malevergne and Rey (2005), which is the equivalent condition to guarantee that an unfair non-monetary background risk makes decision makers more risk averse. The sufficient conditions determined by this note expand...

In this paper, we examine the properties of subjective probabilities induced by optimal expectations. We show that investors who follow optimal expectations underweigh small probabilities and overweigh large probabilities in a simple binary economy. This indicates that the subjective...

Dependent background risks which have functional forms are introduced into Lucas economies. This paper determines the conditions on preferences to guarantee the monotonicity of asset prices, when dependent background risks satisfy the monotonicity and the single crossing conditions.

This note determines a sufficient condition on (von Neumann-Morgenstern) utility functions to preserve (reserve) comparative risk aversion under general background risks. Our condition is weaker than the one determined by Nachman (1982, Journal of Economic Theory). Nachmanfs condition requires...

Dependent background risks which have functional forms are introduced into Lucas economies. This paper determines the conditions on preferences to guarantee the monotonicity of asset prices, when dependent background risks satisfy the monotonicity and the single crossing conditions.