AESTRACT In this paper we extend the continuous-time dynamic programming approach for Asset/Liability Management from Boulier et al. (1995). It is an extension in the sense that we consider objective functions for pension fund management that are different from the standard quadratic loss functions. In particular, we calculate optimal policies for a loss Rmction with Constant Relative Risk Aver...

This paper studies the implications for general equilibnum asset pricing of a class of Kreps-Porteus nonexpected utility preferences characterized by a constant intertemporal elasticity of substitution and a constant, but unrelated, coefficient of relative risk aversion. It is shown that relaxing the parametric restriction on tastes imposed by the time-additive expected utility specification do...

We investigate a representative agent consumption-based asset pricing model with two states: low risk aversion and high risk aversion. We explore whether there is a reasonable parameterization capable of generating the empirically observed seasonally-varying equity and Treasury returns documented by Kamstra, Kramer, and Levi (2008). Calibrating the asset-pricing model to observed consumption da...

The paper analyzes how capital gains due to a reduction in the market discount rate affect life-cycle consumption choice. analysis is done simple general equilibrium model with cohorts of workers and retirees all constant relative risk aversion preferences. Simulation results show fall rates make worse off exception those less than 7 years retirement. has policy implication for taxation gains.

This paper analyzes the existence of an inflation tax Laffer curve (ITLC) in the context of two standard optimizing monetary models: a cash-in-advance model and a money in the utility function model. Agents’ preferences are characterized in the two models by a constant relative risk aversion utility function. Explosive hyperinflation rules out the presence of an ITLC. In the context of a cash-i...

We estimate risk aversion from the actual financial decisions of 2,168 investors in a person-toperson lending platform. We develop a method to estimate a risk aversion parameter from each portfolio choice. Since the same individuals invest repeatedly, we construct a panel dataset that we use to disentangle heterogeneity in attitudes towards risk across investors, from the elasticity of risk ave...

This paper investigates the impact on option prices of divergent consumer conÞdence. To model this, we assume that consumers disagree on the expected growth rate of aggregate consumption. With other conditions unchanged in the discrete-time Black-Scholes option-pricing model, we show that the representative consumer will have declining relative risk aversion instead of the assumed constant rela...

This paper investigates the impact on option prices of divergent consumer conÞdence. To model this, we assume that consumers disagree on the expected growth rate of aggregate consumption. With other conditions unchanged in the discrete-time Black-Scholes option-pricing model, we show that the representative consumer will have declining relative risk aversion instead of the assumed constant rela...

For the standard specification of the utilitarian optimal income tax problem with hidden characteristics, the paper shows that randomized tax schemes are undesirable if preferences exhibit a property of weakly decreasing risk aversion according to the multidimensional risk aversion concept of Hellwig (2004). The property of decreasing risk aversion also implies uniqueness of the optimal income ...

We consider the risk premium π demanded by a decision maker with present wealth x in order to be indifferent between obtaining a new level of wealth y1 with certainty, or to participate in a lottery which either results in unchanged wealth x or a level of wealth y2 > y1. We then define the relative risk premium λ as the quotient between π and the increase in wealth y1−x which the decision maker...