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agents in the economy are heterogeneous in their preference for uncertainty. Each utility functional is a variational type …. The existence of equilibrium is approached by a generalized excess utility fixed point argument. Such Arrow …
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to reconcile this fact with Merton's theory of optimal portfolio selection for wealth maximising agents. In this paper we …. Under the assumption that the market price of risk is proportional to volatility, we can derive closed form expressions for …
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We study the pricing and hedging of derivative securities with uncertainty about the volatility of the underlying asset. Rather than taking all models from a prespecified class equally seriously, we penalise less plausible ones based on their "distance" to a reference local volatility model. In...
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