Investors in financial markets face several restrictions apart from wealth constraints. The first attempt to understand these restrictions in a general competitive equilibrium framework can be traced back to Radner (1972). Here these restrictions are assumed to be given exogenously, as first...

This paper derives and draws on simple formulae for the upper and lower bounds to the value of a series of risky cash flows in order to provide some instructive insights in the impact of taxation on these bounds.The formulae are based on no-arbitrage conditions in a setting that is a...

We document widespread violations of stochastic dominance by one-month S&P 500 index call options market over 1986-2006. These violations imply that a trader can improve her expected utility by engaging in a zero-net-cost trade. We allow the market to be incomplete and also imperfect by...

An economy faces an unknown individual risk, such as the health effects of a recently discovered environmental hazard. Opinions may be widely different about the distribution of risks across the population. We study financial markets that suffice to reach efficient allocations in this situation....

We study endogenous uncertainty stemming from the introduction of new financial assets, so as to evaluate the risks as well as the welfare gains of financial innovation. The introduction of financial assets to hedge individual risk can lead to the risk of default, which is a collective risk. The...

An economy faces an unknown individual risk, such as the health effects of recently discovered environmental hazard. Opinions may be widely different about the distribution of risks across the population. We study financial markets that suffice to reach efficient allocations in this situation....