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| Preface | |
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| Acknowledgments | |
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| General Theory | |
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| The Expected Utility Model | |
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| Simple and Compound Lotteries | |
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| Axioms on Preferences under Uncertainty | |
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| The Expected Utility Theorem | |
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| Critics of the Expected Utility Model | |
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| The Allais Paradox | |
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| The Allais Paradox and Time Consistency | |
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| Risk Aversion | |
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| Characterization of Risk Aversion | |
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| Comparative Risk Aversion | |
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| Certainty Equivalent and Risk Premium | |
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| The Arrow-Pratt Approximation | |
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| Decreasing Absolute Risk Aversion | |
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| Some Classical Utility Functions | |
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| Test for Your Own Degree of Risk Aversion | |
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| An Application: The Cost of Macroeconomic Risks | |
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| Change in Risk | |
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| The Extremal Approach | |
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| Second-Order Stochastic Dominance | |
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| Diversification | |
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| First-Order Stochastic Dominance | |
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| The Standard Portfolio Problem | |
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| The Standard Portfolio Problem | |
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| The Model and Its Basic Properties | |
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| The Case of a Small Risk | |
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| The Case of HARA Functions | |
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| The Impact of Risk Aversion | |
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| The Impact of a Change in Risk | |
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| The Equilibrium Price of Risk | |
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| A Simple Equilibrium Model for Financial Markets | |
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| The Equity Premium Puzzle | |
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| The Equity Premium with Limited Participation | |
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| The Equity Premium and the Integration of International Financial Markets | |
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| Some Technical Tools and Their Applications | |
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| A Hyperplane Separation Theorem | |
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| The Diffidence Theorem | |
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| Link with the Jensen's Inequality | |
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| Applications of the Diffidence Theorem | |
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| Diffidence | |
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| Comparative Diffidence | |
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| Central Risk Aversion | |
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| Central Riskiness | |
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| The Covariance Rule | |
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| Log-Supermodularity | |
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| Definition | |
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| Log-Supermodularity and Single Crossing | |
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| A Theoretical Result | |
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| Applications to the Standard Portfolio Problem | |
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| Jewitt's Preference Orders | |
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| Expectation of a Log-Supermodular Function | |
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| A Theoretical Result | |
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| Two Applications | |
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| Multiple Risks | |
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| Risk Aversion with Background Risk | |
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| Preservation of DARA | |
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| The Comparative Risk Aversion Is Not Preserved | |
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| Extensions with Dependent Background Risk | |
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| Affiliated Background Risk | |
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| The Comparative Risk Aversion in the Sense of Ross | |
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| The Tempering Effect of Background Risk | |
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| Risk Vulnerability | |
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| Risk Vulnerability and Increase in Risk | |
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| Increase in Background Risk | |
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| Increase in the Endogenous Risk | |
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| Risk Vulnerability and the Equity Premium Puzzle | |
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| Generalized Risk Vulnerability | |
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| Standardness | |
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| Taking Multiple Risks | |
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| The Interaction between Asset Demand and Small Gambles | |
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| Are Independent Assets Substitutes? | |
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| The i.i.d. Case | |
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| The General Case | |
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| The Dynamic Investment Problem | |
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| Static versus Dynamic Optimization | |
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| The Standard Portfolio Problem | |
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| The Model | |
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| The HARA Case | |
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| A Sufficient Condition for Younger People to Be More Risk-Averse | |
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| Discussion of the Results | |
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| Nonlinear Risk Tolerance | |
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| Nondifferentiable Marginal Utility | |
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| Background Risk and Time Horizon | |
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| Investors Bear a Background Risk at Retirement | |
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| Stationary Income Process | |
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| Special Topics in Dynamic Finance | |
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| The Length of Periods between Trade | |
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| Dynamic Discrete Choice | |
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| Constraints on Feasible Strategies | |
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| The Effect of a Leverage Constraint | |
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| The Case of a Lower Bound on the Investment in the Risky Asset | |
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| The Case of an Upper Bound on the Investment in the Risky Asset | |
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| The Arrow-Debreu Portfolio Problem | |
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| The Demand for Contingent Claims | |
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| The Model | |
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| Characterization of the Optimal Portfolio | |
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| The Impact of Risk Aversion | |
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| Risk on Wealth | |
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| The Marginal Propensity to Consume in State [pi] | |
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| The Preservation of DARA and IARA | |
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| The Marginal Value of Wealth | |
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| Aversion to Risk on Wealth | |
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| Consumption and Saving | |
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| Consumption under Certainty | |
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| Time Separability | |
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| Exponential Discounting | |
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| Consumption Smoothing under Certainty | |
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| Analogy with the Portfolio Problem | |
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| The Social Cost of Volatility | |
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| The Marginal Propensity to Consume | |
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| Time Diversification and Self-Insurance | |
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| Precautionary Saving and Prudence | |
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| Prudence | |
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| The Demand for Saving | |
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| The Marginal Propensity to Consume under Uncertainty | |
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| Does Uncertainty Increase the MPC? | |
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| Does Uncertainty Make the MPC Decreasing in Wealth? | |
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| More Than Two Periods | |
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| The Euler Equation | |
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| Multiperiod Precautionary Saving | |
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| Illiquid Saving under Uncertainty | |
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| The Equilibrium Price of Time | |
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| Description of the Economy | |
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| The Determinants of the Interest Rate | |
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| The Interest Rate in the Absence of Growth | |
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| The Effect of a Sure Growth | |
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| The Effect of Uncertainty | |
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| The Risk-Free Rate Puzzle | |
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| The Yield Curve | |
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| The Pricing Formula | |
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| The Yield Curve with HARA Utility Functions | |
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| A Result When There Is No Risk of Recession | |
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| Exploring the Slope of the Yield Curve When There Is a Risk of Recession | |
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| The Liquidity Constraint | |
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| Saving as a Buffer Stock | |
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| The Liquidity Constraint Raises Risk Aversion | |
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| The Liquidity Constraint and the Shape of Absolute Risk Tolerance | |
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| Numerical Simulations | |
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| The Saving-Portfolio Problem | |
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| Precautionary Saving with an Endogenous Risk | |
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| The Case of Complete Markets | |
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| The Case of the Standard Portfolio Problem | |
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| Discussion of the Results | |
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| Optimal Portfolio Strategy with Consumption | |
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| The Merton-Samuelson Model | |
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| Disentangling Risk and Time | |
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| The Model of Kreps and Porteus | |
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| Preferences for an Early Resolution of Uncertainty | |
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| Prudence with Kreps-Porteus Preferences | |
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| Equilibrium Prices of Risk and Time | |
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| Efficient Risk Sharing | |
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| The Case of a Static Exchange Economy | |
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| The Mutuality Principle | |
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| The Sharing of the Social Risk | |
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| Decomposition of the Problem | |
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| The Veil of Ignorance | |
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| Efficient Sharing Rules of the Macro Risk | |
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| A Two-Fund Separation Theorem | |
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| The Case of Small Risk per Capita | |
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| Group's Attitude toward Risk | |
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| The Representative Agent | |
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| Arrow-Lind Theorem | |
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| Group Decision and Individual Choice | |
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| Introducing Time and Investment | |
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| A Final Remark: The Concavity of the Certainty Equivalent Functional | |
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| The Equilibrium Price of Risk and Time | |
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| An Arrow-Debreu Economy | |
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| Application of the First Theorem of Welfare Economics | |
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| Pricing Arrow-Debreu Securities | |
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| Pricing by Arbitrage | |
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| The Competitive Price of Risk | |
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| The Competitive Price of Time | |
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| Spot Markets and Markets for Futures | |
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| Corporate Finance in an Arrow-Debreu Economy | |
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| Searching for the Representative Agent | |
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| Analytical Solution to the Aggregation Problem | |
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| Wealth Inequality, Risk Aversion, and the Equity Premium | |
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| Wealth Inequality and the Risk-Free Rate | |
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| The Consumption Smoothing Effect | |
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| The Precautionary Effect | |
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| Risk and Information | |
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| The Value of Information | |
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| The General Model of Risk and Information | |
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| Structure of Information | |
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| The Decision Problem | |
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| The Posterior Maximum Expected Utility Is Convex in the Vector of Posterior Probabilities | |
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| The Value of Information Is Positive | |
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| Refining the Information Structure | |
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| Definition and Basic Characterization | |
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| Garbling Messages and the Theorem of Blackwell | |
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| Location Experiments | |
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| The Value of Information and Risk Aversion | |
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| A Definition of the Value of Information | |
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| A Simple Illustration: The Gambler's Problem | |
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| The Standard Portfolio Problem | |
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| Decision Making and Information | |
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| A Technique for the Comparative Statics of More Informativeness | |
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| The Portfolio-Saving Problem | |
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| A Digression: Scientific Uncertainty, Global Warming, and the "Precautionary Principle" | |
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| The Saving Problem with Uncertain Returns | |
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| Precautionary Saving | |
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| The Value of Flexibility and Option Value | |
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| Predictability and Portfolio Management | |
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| Exogenous Predictability | |
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| Endogenous Predictability and Mean-Reversion | |
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| Information and Equilibrium | |
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| Hirshleifer Effect | |
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| Information and the Equity Premium | |
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| Epilogue | |
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| The Important Open Questions | |
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| The Independence Axiom | |
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| Measures of Risk Aversion | |
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| Qualitative Properties of the Utility Function | |
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| Economics of Uncertainty and Psychology | |
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| Bibliography | |
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| Index of Lemmas and Propositions | |
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| Index of Subjects | |