This note gives a simple, but useful characterization of optimism and pessimism represented by a convex and concave shift of probability weighting functions, and applies it to two comparative static analysis.

This note gives a stochastic dominance representation of more optimistic belief in rank dependent expected utility. Applying this observation, we can demonstrate the effect of more optimistic belief on economic decisions and equilibria under risk making comparative static analysis.

This note gives a simple, but useful characterization of optimism and pessimism represented by a convex and concave shift of probability weighting functions, and applies it to two comparative static analysis.

Dependent background risks which have functional forms are introduced into Lucas economies. This paper determines the conditions on preferences to guarantee the monotonicity of asset prices, when dependent background risks satisfy the monotonicity and the single crossing conditions.

We consider an asset market traded three types of assets: the risk–free asset, the market portfolio and derivatives written on the market portfolio return. We determine a sufficient condition to guarantee that noise risk monotonically changes their derivatives. The condition is that...

This paper studies the “dual” theory of the smooth ambiguity model introduced by Klibanoff et al. (Econometrica 73:1849–1892, <CitationRef CitationID="CR14">2005</CitationRef>). Unlike the original model, we characterize attitudes toward ambiguity captured by second-order probabilities. First, we give a set of axioms to derive a dual...</citationref>

This note determines a sufficient condition on (von Neumann-Morgenstern) utility functions to preserve (reserve) comparative risk aversion under general background risks. Our condition is weaker than the one determined by Nachman (1982, Journal of Economic Theory). Nachmanfs condition requires...

We examine the conditions for preferences and risks that guarantee monotonicity of equilibrium derivative prices. In a Lucas economy with a derivative, we derive the equilibrium derivative price under expectation with respect to risk-neutral probability, and analyze comparative statics on the...

For single-period complete financial asset markets with representative investors, we introduce a bull market measure for uncertain state occurrence and its associated ordering between representative investors in markets based on their marginal rate of substitution between equilibrium consumption...

The goal of this paper is the examination of the conditions on preferences to guarantee the monotonicity of asset prices, when their returns change in the sense of first- and second-order stochastic dominances.