Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2007:12: Rationalizing Constrained Contingent Claims

Anders Borglin () and Sjur Flåm ()
Additional contact information
Anders Borglin: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Sjur Flåm: Economics Department, Bergen University, Postal: Economics Department, Bergen University, Bergen, Norway

Abstract: Choice of contingent claims could reflect risk aversion or pessimism. Accordingly, the underlying, but hidden preferences might fit expected utility of customary von Neumann-Morgenstern form - or more generally, comply with a Choquet integral. This paper considers constrained choice and rationalizes both sorts of attitudes. Two avenues are pursued: one invokes complete orders; the other contends with partial ordering. Emphasis is on incomplete financial markets, featuring nonlinear pricing.

Keywords: Nonlinear price; Risk or uncertainty aversion; Choquet integral; Stochastic order; Incomplete preferences

JEL-codes: C81; D01; G13

21 pages, June 25, 2007

Full text files 

WP07_12.pdf PDF-file

Download statistics

Questions (including download problems) about the papers in this series should be directed to Iker Arregui Alegria ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:hhs:lunewp:2007_012This page generated on 2024-09-13 22:16:09.