Assuming a risk-neutral bank and assuming household utility to be exponential, we show how under information symmetry …

Investors face the challenge of understanding changes in risk. Did a recent increase in risk come from turnover into … drove the change? Which parts of the market became more risky? A related issue is understanding differences among risk … of the markets? The delta-sigma attribution framework addresses these issues by relating a change in risk to the …

uninsured capital income risk, and suffer from an information-processing capacity constraint. For given attention devoted to … capital income risk, we solve for the optimal consumption-saving choices and show that the expected welfare is increasing with … capacity, assuming a relative risk aversion degree larger than unity. Furthermore, we solve for attention choice and find that …

an additional hedging motif driven by the interaction between real exchange rate risk and ambiguity aversion. What … matters is the long-run as opposed to the short-run risk. Domestic equity is a good hedge with respect to long-run real … exchange rate risk even when bonds are traded. The higher is the degree of ambiguity aversion, the stronger is the home bias …

I study a long-run risk model with non-separable leisure and consumption in the Epstein-Zin preferences to price a … (small) stocks do. Here leisure acts as an 'insurance' and decreases the price of long run risk. Expected returns on stocks …