Finance and the Economics of Uncertainty

Gabrielle Demange is Director at EHESS (Ecole des Hautes Etudes en Sciences Sociales) and researcher at PSE (Paris-Jourdan Sciences Economiques), and is Co-Editor of the journal Economic Theory. Guy Laroque is Director of the Macroeconomic Laboratory at INSEE-CREST (Institut National de la Statistique et des Etudes Economiques-Centre de Recherche en Economie et Statistique) as well as a former Editor of Econometrica (1992-1996).

"The authors discuss in a clear and motivated way some essential problems such as incompleteness, market viability or dissemination of information. Graduate students in economics will find this textbook a valuable supplement to the extensive literature on financial engineering." Christian Gourieroux, Center of Research in Economics and Statistics in France"Given the explosive growth of the finance literature, even well-trained microeconomists may feel left behind. They should be grateful to Demange and Laroque for giving them such a clear and unified picture of how financial instruments allocate risk in the economy." Bernard Salanie, Columbia University

• List of main symbols. Introduction.I. Value by Arbitrage.1. Financial instruments: an introduction.2. Arbitrage.II. Exchanging Risk.3. Investors and their information.4. Portfolio choice.5. Optimal risk sharing and insurance.6. Equilibrium on the stock exchange and risk sharing.7. Trade and information.8. Intertemporal valuation.III. The Firm.9. Corporate finance and risk.10. Financing investments and limited liability.Index