We investigate the dynamic consumption and portfolio selection problem of an agent who has an intertemporal preference with loss and risk aversion, as proposed by Choi et al. (2019a). We disentangle the effects of loss aversion from those of risk aversion on risk taking. We show by simulation...

We study the consumption and portfolio selection problem of an agent who faces consumption irreversibility: there is disutility from changing consumption levels. The derived preference exhibits intertemporal loss aversion toward consumption changes with the previous consumption level being the...

We propose a model of hedging and investment with ambiguity aversion in an incomplete financial market. We show that the agent's worst-case belief depends upon the payoff of the derivative to be hedged. Thus, we identify situations where one can distinguish ambiguity averse agents from...