The paper discusses situations where certain parameters are given values that are outside their natural ranges. One case is obtained when plugging in a negative value for the volatility parameter in the Black and Scholes ...

In order to find the real market value of an asset in an exchange economy, one would typically apply the formula appearing in Lucas (1978), developed in a discrete time framework. This theory has also been extended to ...

We consider risk sharing among individuals in a one-period setting under uncertainty, that will result in payoffs to be shared among the members. We start with optimal risk sharing in an Arrow-Debreu economy, or equivalently, ...

The paper analyses optimal spending of an endowment fund. We use the life cycle model for both expected utility and recursive utility in discrete time. First we find the optimal consumption and investment policies for both ...

In his classical article in The American Economic Review, Arthur Raviv (1979) examines Pareto optimal insurance contracts when there are ex-post insurance costs c induced by the indemnity I for loss x. Raviv’s main ...

In this paper we solve an optimal stopping problem with an infinite time horizon, when the state variable follows a jump-diffusion. Under certain conditions our solution can be interpreted as the price of an American ...

Risk sharing resulting in pooling of risk is considered. First pooling is discussed from the perspective of life and pension insurance. Second we take the perspective of Pareto optimal risk sharing, originating from a model ...

An economic model is proposed for a combined price futures and yield futures market. The innovation of the paper is a technique of transforming from quantity and price to a model of two genuine pricing processes. This is ...

We derive the equilibrium interest rate and risk premiums using recursive utility for jump-di usions. Compared to to the continuous version, including jumps allows for a separate risk aversion related to jump size risk ...

We study the Epstein-Zin model with recursive utility. Recognizing that recursive preferences implies that the underlying model is not Markovian, we use methods not depending upon the Markov property to solve the model. ...