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The question of pricing and hedging a given contingent claim has a unique solution in a complete market framework. When some incompleteness is introduced, the problem becomes however more difficult. Several approaches have been adopted in…
An investor with constant relative risk aversion and an infinite planning horizon trades a risky and a safe asset with constant investment opportunities, in the presence of small transaction costs and a binding exogenous portfolio…
An investor's risk aversion is assumed to tend to infinity. In a fairly general setting, we present conditions ensuring that the respective utility indifference prices of a given contingent claim converge to its super replication price.
The paper introduces benchmark-neutral pricing and hedging for long-term contingent claims. It employs the growth optimal portfolio of the stocks as numeraire and the new benchmark-neutral pricing measure for pricing. For a realistic…
We study the equilibria of uniform price auctions where many asymmetric bidders have flat demands up to their respective quantity constraints. We present an iterative procedure that systematically finds an equilibrium outcome as well as an…
We study the price of anarchy of mechanisms in the presence of risk-averse agents. Previous work has focused on agents with quasilinear utilities, possibly with a budget. Our model subsumes this as a special case but also captures that…
We develop a general theory of risk measures that determines the optimal amount of capital to raise and invest in a portfolio of reference traded securities in order to meet a pre-specified regulatory requirement. The distinguishing feature…
We study competitive equilibrium in the canonical Fisher market model, but with indivisible goods. In this model, every agent has a budget of artificial currency with which to purchase bundles of goods. Equilibrium prices match between…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
In this paper, we show that if every consumer in an economy has a quasi-linear utility function, then the normalized equilibrium price is unique, and is locally stable with respect to the t\^atonnement process. Our study can be seen as that…
We consider a problem of optimal investment with intermediate consumption in the framework of an incomplete semimartingale model of a financial market. We show that a necessary and sufficient condition for the validity of key assertions of…
We consider a competitive market with risk-averse participants. We assume that agents' risks are measured by coherent risk measures introduced by Artzner et al. (1999). Fundamental theorems of welfare economics have long established the…
We study a pure-exchange incomplete-market economy with heterogeneous agents. In each period, the agents choose how much to save (i.e., invest in a risk-free bond), how much to consume, and which bundle of goods to consume while their…
We study a dynamic asset pricing problem in which a representative agent is ambiguous about the aggregate endowment growth rate and trades a risky stock, human capital, and a risk-free asset to maximize her preference value of consumption…
We propose a term structure power price model that, in contrast to widely accepted no-arbitrage based approaches, accounts for the non-storable nature of power. It belongs to a class of equilibrium game theoretic models with players divided…
We study the complexity of deciding the existence of mixed equilibria for minimization games where players use valuations other than expectation to evaluate their costs. We consider risk-averse players seeking to minimize the sum…
This essay discusses the advantages of a probabilistic agent-based approach to questions in theoretical economics, from the nature of economic agents, to the nature of the equilibria supported by their interactions. One idea we propose is…
This paper develops a theory of competitive equilibrium with indivisible goods based entirely on economic conditions on demand. The key idea is to analyze complementarity and substitutability between bundles of goods, rather than merely…
In a Markovian stochastic volatility model, we consider financial agents whose investment criteria are modelled by forward exponential performance processes. The problem of contingent claim indifference valuation is first addressed and a…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…