China has moved rapidly from a socialist planned economy to a market economy. As a result, many enterprises in China are seeking talented top management to increase their performance and decrease their default risk. Studies abound regarding top management turnover and its relationship with firm performance, however, few studies have connected top management turnover with firm default risk. In C...

Higher-order risk attitudes include risk aversion, prudence, and temperance. This paper analyzes the eff ects of such preferences on medical test and treatment decisions, represented either by test and treatment thresholds or – if the test characteristics are endogenous – by the optimal cutoff value for testing. For a risk-averse decision maker, treatment is a risk reducing strategy since it pr...

We test the implications of ambiguity aversion in a principal-agent problem with multiple agents. When output distributions are uncertain, models of ambiguity aversion suggest that tournaments may become more attractive than independent wage contracts, in contrast to the case where output distributions are known. We do so by presenting agents with a choice between tournaments and independent co...

We develop a method for pricing counterparty risk by using good deal bounds. The method imposes a new restriction in the arbitrage free model by setting upper bounds on the Sharpe ratios of the assets. The potential prices which are eliminated represent unreasonably good deals. The constraint on the Sharpe ratio translates into a constraint on the stochastic discount factor. Thus, one can obtai...

This paper evaluates the data from the recent financial crisis to examine the risk spillover effects of financial markets value at risk (VaR), which captures the extreme behavior of an asset, is considered a measure of risk in an asset or in a market. We hypothesize that an extreme downside movement of returns in a market measured by a VaR has negative effects on other markets, causing a simila...

Risk preferences are generally measured with utility functions, which are subjective and usually restrict market agents to be risk averse. The current study investigates investors' preferences toward risk from the index price movement perspective. In a risk neutral market, future prices will increase or decrease with the same probability. However, if the market representative-agents are risk av...

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-averse preferences, the demand for these contracts is not explained by di erences in the shape of utility functions. Rather, it is the degree to which agents face other, non-hedgeable, background risks that determin...

Risk and uncertainty have been extensively studied by agricultural economists. In this paper we question (a) the predominant use of static frameworks to formally analyse risk; (b) the predominant focus on risk aversion as the motivation for considering risk and (c) the notion that explicitly probabilistic models are likely to be helpful to farmers in their decision making. We pose the question:...

In this paper, we investigate the efficacy of subdomain testing and random testing using the expected number of failures detected (the E-measure) as a measure of effectiveness. Simple as it is, the E-measure does provide a great deal of useful information about the fault-detecting capability of testing strategies. With the E-measure, we obtain new characterizations of subdomain testing, includi...

Fair pricing of embedded options in life insurance contracts is usually conducted by using risk-neutral valuation. This pricing framework assumes a perfect hedging strategy, which insurance companies can hardly pursue in practice. In this paper, we extend the risk-neutral valuation concept with a risk measurement approach. We accomplish this by first calibrating contract parameters that lead to...