The Economics of Risk and Time

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Gollier, Christian

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ISBN:9780262572248
Editorial: Mit Press
Fecha de la edición:2004
Encuadernación:
Nº Pág.:465
Idiomas:Ingles,Inglés

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/ Análisis Económico

This book updates and advances the theory of expected utility as applied to risk analysis and financial decision making. Von Neumann and Morgenstern pioneered the use of expected utility theory in the 1940s, but most utility functions used in financial management are still relatively simplistic and assume a mean-variance world. Taking into account recent advances in the economics of risk and uncertainty, this book focuses on richer applications of expected utility in finance, macroeconomics, and environmental economics.The book covers these topics: expected utility theory and related concepts; the standard portfolio problem of choice under uncertainty involving two different assets; P the basic hyperplane separation theorem and log-supermodular functions as technical tools for solving various decision-making problems under uncertainty; s choice involving multiple risks; the Arrow-Debreu portfolio problem; consumption and saving; the equilibrium price of risk and time in an Arrow-Debreu economy; and dynamic models of decision making when a flow of information on future risks is expected over time. The book is appropriate for both students and professionals. Concepts are presented intuitively as well as formally, and the theory is balanced by empirical considerations. Each chapter concludes with a problem set.

1 The expected utility model 3
2 Risk aversion 17
3 Change in risk 39
4 The standard portfolio problem 53
5 The equilibrium price of risk 65
6 A hyperplane separation theorem 81
7 Log-supermodularity 99
8 Risk aversion with background risk 113
9 The tempering effect of background risk 125
10 Taking multiple risks 141
11 The dynamic investment problem 155
12 Special topics in dynamic finance 175
13 The demand for contingent claims 195
14 Risk on wealth 205
15 Consumption under certainty 217
16 Precautionary saving and prudence 235
17 The equilibrium price of time 249
18 The liquidity constraint 269
19 The saving-portfolio problem 285
20 Disentangling risk and time 297
21 Efficient risk sharing 307
22 The equilibrium price of risk and time 327
23 Searching for the representative agent 343
24 The value of information 357
25 Decision making and information 383
26 Information and equilibrium 407
27 Epilogue 423