This paper examines the behavior of the regret-averse firm under exchange rate uncertainty. Regret-averse preferences are characterized by a modified utility function that includes disutility from having chosen ex-post suboptimal alternatives. We show that the conventional results that the firm...

This paper examines the interplay of the financing and hedging decisions of a risk-averse multinational firm having a wholly-owned foreign subsidiary. Exchange rate risk management of the multinational firm is shown to have direct impacts on its international capital structure decision and on...

This paper examines the interplay between the real and financial decisions of the competitive firm under output price uncertainty. The firm faces additional sources of uncertainty that are aggregated into a background risk. We show that the firm always chooses its optimal debt–equity ratio to...

We study the optimal production of a competitive risk-averse firm under price uncertainty. We suppose that the firm is also regret-averse. For example, if market prices ex post turn out to be very high the firm might regret not producing more. If it turns out that the price is low the firm might...

We use the industrial organization approach to the microeconomic s of banking, augment Ed by uncertainty and risk aversion, to ex a mine c r edit derivatives and macro derivatives as instruments t o hedge c r edit risk for a large commercial bank. In a partial-analytic framework we distinguish...

The industrial organization approach to the microeconomics of banking augmented by uncertainty and risk aversion is used to examine credit derivatives and macro derivatives as instruments to hedge credit risk for a large commercial bank. In a partial-analytic framework we distinguish between the...