Description
Book SynopsisFinance and the Economics of Uncertainty explores the growing range of economic decisions that are conducted under uncertainty both on the personal level, as well as by large firms. * Analyzes the allocation of risk in the context of the current literature, as well as emphasizes the role of information in decisions and prices.
Trade Review"The authors discuss in a clear and motivated way some essential problems such as incompleteness, market viability or dissemination of information. Graduate students in economics will find this textbook a valuable supplement to the extensive literature on financial engineering."
Christian Gourieroux, Center of Research in Economics and Statistics in France "Given the explosive growth of the finance literature, even well-trained microeconomists may feel left behind. They should be grateful to Demange and Laroque for giving them such a clear and unified picture of how financial instruments allocate risk in the economy." Bernard Salanie, Columbia University
Table of ContentsList of main symbols.
Introduction.
I. Value by Arbitrage.
1. Financial instruments: an introduction.
2. Arbitrage.
II. Exchanging Risk.
3. Investors and their information.
4. Portfolio choice.
5. Optimal risk sharing and insurance.
6. Equilibrium on the stock exchange and risk sharing.
7. Trade and information.
8. Intertemporal valuation.
III. The Firm.
9. Corporate finance and risk.
10. Financing investments and limited liability.
Index
