The Economics of Risk and Time / Edition 1

The Economics of Risk and Time / Edition 1

by Christian Gollier, GollierChristian
     
 

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

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Overview

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.

The MIT Press

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Product Details

ISBN-13:
9780262572248
Publisher:
MIT Press
Publication date:
09/01/2004
Edition description:
New Edition
Pages:
465
Product dimensions:
6.00(w) x 9.00(h) x 0.85(d)
Age Range:
18 Years

Table of Contents

1The expected utility model3
2Risk aversion17
3Change in risk39
4The standard portfolio problem53
5The equilibrium price of risk65
6A hyperplane separation theorem81
7Log-supermodularity99
8Risk aversion with background risk113
9The tempering effect of background risk125
10Taking multiple risks141
11The dynamic investment problem155
12Special topics in dynamic finance175
13The demand for contingent claims195
14Risk on wealth205
15Consumption under certainty217
16Precautionary saving and prudence235
17The equilibrium price of time249
18The liquidity constraint269
19The saving-portfolio problem285
20Disentangling risk and time297
21Efficient risk sharing307
22The equilibrium price of risk and time327
23Searching for the representative agent343
24The value of information357
25Decision making and information383
26Information and equilibrium407
27Epilogue423

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