Related papers: Risk-averse asymptotics for reservation prices

In an incomplete market the price of a claim f in general cannot be uniquely identified by no arbitrage arguments. However, the ``classical'' super replication price is a sensible indicator of the (maximum selling) value of the claim. When…

In this article we consider a special case of an optimal consumption/optimal portfolio problem first studied by Constantinides and Magill and by Davis and Norman, in which an agent with constant relative risk aversion seeks to maximise…

We establish a super-replication duality in a continuous-time financial model where an investor's trades adversely affect bid- and ask-prices for a risky asset and where market resilience drives the resulting spread back towards zero at an…

We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations,…

We revisit the problem of portfolio selection, where an investor maximizes utility subject to a risk constraint. Our framework is very general and accommodates a wide range of utility and risk functionals, including non-concave utilities…

We represent preferences that exhibit absolute or relative attitudes towards ambiguity without assuming convexity of preferences. Our analysis is motivated by the recent experimental evidence by Baillon and Placido (2019) indicating that…

We consider the setting in which an electric power utility seeks to curtail its peak electricity demand by offering a fixed group of customers a uniform price for reductions in consumption relative to their predetermined baselines. The…

An asset pricing model using long-run capital share growth risk has recently been found to successfully explain U.S. stock returns. Our paper adopts a recursive preference utility framework to derive an heterogeneous asset pricing model…

We demonstrate a limitation of discounted expected utility, a standard approach for representing the preference to risk when future cost is discounted. Specifically, we provide an example of the preference of a decision maker that appears…

We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent…

This paper considers exponential utility indifference pricing for a multidimensional non-traded assets model subject to inter-temporal default risk, and provides a semigroup approximation for the utility indifference price. The key tool is…

We propose an empirical method to analyze data from first-price procurements where bidders are asymmetric in their risk-aversion (CRRA) coefficients and distributions of private costs. Our Bayesian approach evaluates the likelihood by…

Different models of capital exchange among economic agents have been proposed recently trying to explain the emergence of Pareto's wealth power law distribution. One important factor to be considered is the existence of risk aversion. In…

In this paper we examine a multivariate risk model, with common renewal counting process, constant interest rate, and each claim vector is accompanied by a random number of delayed claim vectors. The interest is focused on the asymptotic…

This paper studies the optimal risk-averse timing to sell a risky asset. The investor's risk preference is described by the exponential, power, or log utility. Two stochastic models are considered for the asset price -- the geometric…

This study provides the solution to the equity premium puzzle. The new model was developed by including the behavior of investors toward risk in financial markets in prior studies. The calculations of this newly tested model show that the…

We consider risk averse investors with different levels of anxiety about asset price drawdowns. The latter is defined as the distance of the current price away from its best performance since inception. These drawdowns can increase either…

This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…

We study reserve prices in auctions with independent private values when bidders are expectations-based loss averse. We find that the optimal public reserve price excludes fewer bidder types than under risk neutrality. Moreover, we show…

We study asset price bubbles in market models with proportional transaction costs $\lambda\in (0,1)$ and finite time horizon $T$ in the setting of [49]. By following [28], we define the fundamental value $F$ of a risky asset $S$ as the…