... Our contribution extends the model of Eeckhoudt and Gollier (2005). Key words: Absolutepruden... more ... Our contribution extends the model of Eeckhoudt and Gollier (2005). Key words: Absoluteprudence, Moments of the loss distribution, Self-protection, Vari-... Social Science Research Council of Canada (SSRCC). We thank Louis Eeckhoudt, Rachel J. Huang and Pierre ...
Abstract: We extend the Consumption-based CAPM (C-CAPM) model for representative agents with diff... more Abstract: We extend the Consumption-based CAPM (C-CAPM) model for representative agents with different risk attitudes. We introduce the concept of expectation dependence and show that for a risk averse representative agent, it is the firstt-degree expectation ...
Abstract: In the literature, utility functions in the expected utility class are generically limi... more Abstract: In the literature, utility functions in the expected utility class are generically limited to second-order (conditional) risk aversion, while non-expected utility functions can exhibit either first-order or second-order (conditional) risk aversion. This paper extends the ...
ABSTRACT In this paper, we investigate two generalized two-period smooth ambiguity models. The fi... more ABSTRACT In this paper, we investigate two generalized two-period smooth ambiguity models. The first one is for precautionary saving problem, and the second one is for self-insurance and self-protection problem. These models put risk, ambiguity and time preferences together in a Kreps-Porteus aggregator, and disentangle the effects among risk, ambiguity and time preferences. First, we qualitatively identify how risk aversion, ambiguity aversion and intertemporal substitution jointly determine precautionary saving. Then, we characterize the impact of risk, ambiguity and time attitudes on the demand for self-insurance and self-protection. We show that both models share the similar intuitions.
ABSTRACT We study under what conditions risk aversion to a risk in the sense of Arrow-Pratt can b... more ABSTRACT We study under what conditions risk aversion to a risk in the sense of Arrow-Pratt can be preserved in the presence of a weak form of dependent background risk. We focus on bivariate random vectors that have a dependence structure of positive Nth-order expectation dependence. Under this dependence structure, the bivariate utility function should have the properties of concavity in the �rst attribute, and risk apportionment of order (1; k) for k = 1,...,N. Our result enlarges the conditions leading to risk aversion.
ABSTRACT Higher-order risk attitudes other than risk aversion (e.g., prudence and temperance) pla... more ABSTRACT Higher-order risk attitudes other than risk aversion (e.g., prudence and temperance) play vital roles both in theoretical and empirical work. While the literature has mainly focused on how they entail a preference for combining “good” outcomes with “bad” outcomes, we consider here an alternative approach which relates higher-order risk attitudes to the sign of correlation. The theoretical result in this paper proposes new insights into economic and financial applications such as risk aversion in the presence of another risk, bivariate stochastic dominance and justifying the first-order approach to moral hazard principal-agent problems.
... Our contribution extends the model of Eeckhoudt and Gollier (2005). Key words: Absolutepruden... more ... Our contribution extends the model of Eeckhoudt and Gollier (2005). Key words: Absoluteprudence, Moments of the loss distribution, Self-protection, Vari-... Social Science Research Council of Canada (SSRCC). We thank Louis Eeckhoudt, Rachel J. Huang and Pierre ...
Abstract: We extend the Consumption-based CAPM (C-CAPM) model for representative agents with diff... more Abstract: We extend the Consumption-based CAPM (C-CAPM) model for representative agents with different risk attitudes. We introduce the concept of expectation dependence and show that for a risk averse representative agent, it is the firstt-degree expectation ...
Abstract: In the literature, utility functions in the expected utility class are generically limi... more Abstract: In the literature, utility functions in the expected utility class are generically limited to second-order (conditional) risk aversion, while non-expected utility functions can exhibit either first-order or second-order (conditional) risk aversion. This paper extends the ...
ABSTRACT In this paper, we investigate two generalized two-period smooth ambiguity models. The fi... more ABSTRACT In this paper, we investigate two generalized two-period smooth ambiguity models. The first one is for precautionary saving problem, and the second one is for self-insurance and self-protection problem. These models put risk, ambiguity and time preferences together in a Kreps-Porteus aggregator, and disentangle the effects among risk, ambiguity and time preferences. First, we qualitatively identify how risk aversion, ambiguity aversion and intertemporal substitution jointly determine precautionary saving. Then, we characterize the impact of risk, ambiguity and time attitudes on the demand for self-insurance and self-protection. We show that both models share the similar intuitions.
ABSTRACT We study under what conditions risk aversion to a risk in the sense of Arrow-Pratt can b... more ABSTRACT We study under what conditions risk aversion to a risk in the sense of Arrow-Pratt can be preserved in the presence of a weak form of dependent background risk. We focus on bivariate random vectors that have a dependence structure of positive Nth-order expectation dependence. Under this dependence structure, the bivariate utility function should have the properties of concavity in the �rst attribute, and risk apportionment of order (1; k) for k = 1,...,N. Our result enlarges the conditions leading to risk aversion.
ABSTRACT Higher-order risk attitudes other than risk aversion (e.g., prudence and temperance) pla... more ABSTRACT Higher-order risk attitudes other than risk aversion (e.g., prudence and temperance) play vital roles both in theoretical and empirical work. While the literature has mainly focused on how they entail a preference for combining “good” outcomes with “bad” outcomes, we consider here an alternative approach which relates higher-order risk attitudes to the sign of correlation. The theoretical result in this paper proposes new insights into economic and financial applications such as risk aversion in the presence of another risk, bivariate stochastic dominance and justifying the first-order approach to moral hazard principal-agent problems.
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