The Economics of Risk and Time [Paperback]

Christian Gollier (Author)

Book Description

ISBN-10: 0262572249 | ISBN-13: 978-0262572248 | Publication Date: August 20, 2004 | Edition: New Ed

This book updates and advances the theory of expected utility as applied to risk analysis and financial decision making. Von Neumann and Morgenstern pioneered the use of expected utility theory in the 1940s, but most utility functions used in financial management are still relatively simplistic and assume a mean-variance world. Taking into account recent advances in the economics of risk and uncertainty, this book focuses on richer applications of expected utility in finance, macroeconomics, and environmental economics.The book covers these topics: expected utility theory and related concepts; the standard portfolio problem of choice under uncertainty involving two different assets; P the basic hyperplane separation theorem and log-supermodular functions as technical tools for solving various decision-making problems under uncertainty; s choice involving multiple risks; the Arrow-Debreu portfolio problem; consumption and saving; the equilibrium price of risk and time in an Arrow-Debreu economy; and dynamic models of decision making when a flow of information on future risks is expected over time. The book is appropriate for both students and professionals. Concepts are presented intuitively as well as formally, and the theory is balanced by empirical considerations. Each chapter concludes with a problem set.

Editorial Reviews

Review

"Among academic experts, Larry Kotlikoff has earned the title 'Mr. Generational Accounting.' His unfuzzy arithmetic decisively rebuts the Bush tax cuts, which are based on the delusion that 5 - 4 = 6, not 1. Read and judge for yourself the specter of our future: too many retirees dependent on too few working-age people. Fiscal imprudence now mandates broken promises later."--Paul A. Samuelson, MIT, Nobel Laureate in Economic Sciences (1970)

"Gollier's treatise on risk and time will be the bible for future finance theory and practice. Get your copy; read and reread. Keep ahead of the competitive mob." Paul A. Samuelson, Massachusetts Institute of Technology

"Presents a unified and up-to-date analysis of the expected utility model." Journal of Economic Literature

"Gollier's treatise on risk and time will be the bible for future finance theory and practice. Get your copy; read and reread. Keep ahead of the competitive mob."--Paul A. Samuelson, MIT, Nobel Laureate in Economic Sciences (1970)

"An authoritative, state-of-the art compendium on expected utility, the savings/portfolio choice problem, and much more."--Jacques Dreze, Center for Operations Research and Econometrics (CORE), Université catholique de Louvain, Belgium

"Christian Gollier offers a lucid and comprehensive treatment of the theory of expected utility. He clarifies the deep structure of the theory, and systematically explores the connections between observed decisions and the preferences that generate them. This book will be an invaluable resource for students of choice under uncertainty."--John Y. Campbell, Department of Economics, Harvard University

"The problem of household portfolio choice is both basic and complex. It is basic because it confronts any individual with more than minimal savings; it is complex because it involves issues at the frontier of finance theory, including horizon effects, uninsurable labor income risk, and taxation. This book reviews recent theoretical, computational, and econometric advances and applies them to data sets from several developed countries. It will be an extraordinarily valuable resource for researchers and students working on one of the most exciting topics in financial economics."--John Y. Campbell, Department of Economics, Harvard UniversityPlease note: Endorser gives permission to use either complete text or final two sentences as an endorsement.

"This book is itself a modern classic. It summarizes deftly, succinctly, and elegantly four decades of vintage frontier findings by two score top academics. McKenzie himself is first among equals in this stellar group."--Paul A. Samuelson, MIT, Nobel Laureate in Economic Sciences (1970)

About the Author

Christian Gollier is Professor of Economics at the University of Toulouse, FFSA Chair of Insurance at the Institut d'Economie Industrielle, and coordinator of the European area network in Applied Microeconomics at CESifo.

Product Details

• Paperback: 465 pages
• Publisher: The MIT Press; New Ed edition (August 20, 2004)
• Language: English
• ISBN-10: 0262572249
• ISBN-13: 978-0262572248
• Product Dimensions: 8.6 x 5.7 x 0.9 inches
• Shipping Weight: 1.4 pounds (View shipping rates and policies)
• Average Customer Review: 5.0 out of 5 stars  See all reviews (4 customer reviews)
• Amazon Best Sellers Rank: #1,079,263 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

12 of 12 people found the following review helpful:

5.0 out of 5 stars a gem, July 3, 2003

By 

Yvan Lengwiler (Basel, Switzerland) - See all my reviews

This review is from: The Economics of Risk and Time (Hardcover)

Gollier has written a book that not many others could have written. It is VERY complete, it is full of deep insights, and, for me, it is a pleasure to read. Don't be mistaken: this is a research book, not a textbook. But for those of us doing research in decision theory, general equilibrium, finance, or macroeconomics, it is simply a must. How could you afford NOT to buy it?

3 of 3 people found the following review helpful:

5.0 out of 5 stars Excellent book, August 28, 2007

By 

Hector "HR" (Argentina) - See all my reviews

This review is from: The Economics of Risk and Time (Paperback)

This book presents an excellent summary of the toolbox that students and professionals must manage in order to understand the numberless amount of modern contributions on asset pricing. All recent advances in the use of risk and uncertainty are presented with simple and direct language, and without useless mathematical sophistication. A needed help for asset pricing courses intended to graduate students.

2 of 2 people found the following review helpful:

5.0 out of 5 stars masterpiece, August 6, 2007

By 

X. Che (washington dc) - See all my reviews
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This review is from: The Economics of Risk and Time (Paperback)

Amazing book connecting all the dots you know in asset pricing, macro, general equil'um, etc. You come out of it refreshed, feeling you are a different person.