Background risk and the theory of the competitive firm under uncertainty
Article Abstract:
The sources of uncertainty on the optimal production decision of a firm are modelled based on Kimball's standard risk aversion and Ross' stronger measures of risk aversion. The effects of output price risk and background risk on a firm's output are analyzed. Sufficient conditions for the transformation of the background risk to achieve an unambiguous negative result are also discussed.
Publication Name: Bulletin of Economic Research
Subject: Economics
ISSN: 0307-3378
Year: 1996
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Spanning with American options
Article Abstract:
Multiperiod American options generate dynamically complete markets while multiperiod European options do not. Example of an economy in which multiperiod American options generically exist on a primitive security, generating dynamically complete markets is presented.
Publication Name: Journal of Economic Theory
Subject: Economics
ISSN: 0022-0531
Year: 2003
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