Related papers: Asset Prices and Risk Aversion
We provide a unifying way to analyze how risk aversion changes bidding in auctions by asking which bids become more attractive as bidders become more risk averse. In first-price auctions, under two payoff conditions--winning is never worse…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
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…
Since exchange economy considerably varies in the market assets, asset prices have become an attractive research area for investigating and modeling ambiguous and uncertain information in today markets. This paper proposes a new generative…
We use insights from epidemiology, namely the SIR model, to study how agents infect each other with "investment ideas." Once an investment idea "goes viral," equilibrium prices exhibit the typical "fever peak," which is characteristic for…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…
Income- and price-elasticity of demand quantify the responsiveness of markets to changes in income, and in prices, respectively. Under the assumptions of utility maximization and preference-independence (additive preferences), mathematical…
Nowadays, attitudes towards electricity customers have been changed, so that they are no longer considered static players. The customers behavior identification is vital for establishing modern power systems. This paper utilizes the…
We investigate entropy as a financial risk measure. Entropy explains the equity premium of securities and portfolios in a simpler way and, at the same time, with higher explanatory power than the beta parameter of the capital asset pricing…
This work solves the equilibrium price formation problem for the risky stock by combining mean-field game theory with the binomial tree framework, adapting the classic approach of Cox, Ross \& Rubinstein. For agents with exponential and…
Throughout history, many countries have repeatedly experienced large swings in asset prices, which are usually accompanied by large fluctuations in macroeconomic activity. One of the characteristics of the period before major economic…
This paper develops a dynamic equilibrium model of the insurance market that jointly characterizes insurers' underwriting, investment, recapitalization, and dividend policies under model uncertainty and financial frictions. Competitive…
Existing approaches to asset-pricing under model-uncertainty adapt classical utility-maximization frameworks and seek theoretical comprehensiveness. We move toward practice by considering binary model-risks and by emphasizing 'constraints'…
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…
We consider a financial market model which consists of a financial asset and a large number of interacting agents classified into many types. Different types of agents are heterogeneous in their price expectations. Each agent can change its…
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…
This paper considers a newly delayed reinsurance and investment optimization problem incorporating random risk aversion, in which an insurer pursues maximization of the expected certainty equivalent of her/his terminal wealth and the…