Skiadas (2009) shows that Klibanoff, Marinacci, Mukerji (2005, 2009) and related smooth representations of ambiguity averse preferences are not able to describe an ambiguity averse behavior when the underlying uncertainty is of the Brownian or Poissonian type. We propose a preferences...

We consider a linear factor APT model and assume that agents are ambiguity averse with respect to payoffs of arbitrage portfolios. In contrast to the standard result, pricing errors need not converge to zero in the limit as the number of assets goes to infinity. Even in the case of exact factor...

The ecological literature suggests that biodiversity reduces the variance of ecosystem services. Thus, conservative biodiversity management has an insurance value to risk-averse users of ecosystem services. We analyze a conceptual ecological-economic model in which such management measures...