An important determinant of option prices is the elasticity of the pricing kernel used to price all claims in the economy. In this paper, we rst show that for a given forward price of the underlyingâ€¦ (More)

Multiplicative Background Risk by GÃ¼nter Franke, Harris Schlesinger, Richard C. Stapleton We consider random wealth of the multiplicative form x ï€šá»¹, where xï€š and á»¹ are statistically independentâ€¦ (More)

In this paper, we derive an equilibrium in which some investors buy call put options on the market portfolio while others sell them. Since investors are assumed to have similar risk-averseâ€¦ (More)

The Term Structure of Interest-Rate Futures Prices We derive general properties of two-factor models of the term structure of interest rates and, in particular, the process for futures prices andâ€¦ (More)

The Geske-Johnson approach provides an e cient and intuitively appealing technique for the valuation and hedging of American-style contingent claims. Here, we generalize their approach to aâ€¦ (More)

Risk Taking with Additive and Multiplicative Background risks. We examine the effects of background risks on optimal portfolio choice. Examples of background risks include uncertain labor income,â€¦ (More)

In this paper we re-examine the Geske-Johnson formula (1984) and extend the analysis by deriving a modified Geske-Johnson formula that can overcome the possibility of non-uniform convergenceâ€¦ (More)

We present a necessary and sufficient condition on an agentâ€™s utility function for a simple mean preserving spread in an independent background risk to increase the agentâ€™s risk aversion (incrementalâ€¦ (More)

We consider portfolios whose returns depend on at least three variables and show the e ect of the correlation structure on the probabilities of the extreme outcomes of the portfolio return, using aâ€¦ (More)

Guenter Franke1, Richard C. Stapleton2, and Marti G. Subrahmanyam3 1 FakultÃ¤t fÃ¼r Wirtschaftswissenschaften und Statistik, University of Konstanz, 78457 Konstanz, GERMANY (e-mail:â€¦ (More)