The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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On the Theory of Rational Insurance Purchasing: A Note
Published: 06/01/1985 | DOI: 10.1111/j.1540-6261.1985.tb04974.x
ERIC P. BRIYS, HENRI LOUBERGE
The authors consider the optimal amount of insurance purchased by an individual who behaves according to the Hurwicz criterion of choice under uncertainty. Their results are compared with earlier results obtained in alternative frameworks (expected utility maximization and Savage's regret criterion). It is shown that a positive amount deductible is often suboptimal.
Optimal Hedging under Intertemporally Dependent Preferences
Published: 09/01/1990 | DOI: 10.1111/j.1540-6261.1990.tb02440.x
ERIC BRIYS, MICHEL CROUHY, HARRIS SCHLESINGER
This paper examines optimal hedging behavior in a market where preferences for current consumption are partly determined by the consumer's past consumption history. The model considers an individual exposed to price risk, who allocates wealth between consumption and futures contracts over a (continuous‐time) finite planning horizon. The speculative component of the hedge ratio is shown to be smaller and the consumption path smoother than in models where preferences are separable over time. Some comparative‐static properties of the hedge ratio are also examined.
The Pricing of Default‐free Interest Rate Cap, Floor, and Collar Agreements
Published: 12/01/1991 | DOI: 10.1111/j.1540-6261.1991.tb04647.x
ERIC BRIYS, MICHEL CROUHY, RAINER SCHÖBEL
The paper focuses on the valuation of caps, floors, and collars in a contingent claim framework under continuous time. These instruments are interpreted as options on traded zero coupon bonds. The bond prices themselves are used as the underlying stochastic variables. This has the advantage that we end up with closed form solutions which are easy to compute. Special attention is devoted to the choice of the stochastic process appropriate for the price dynamics of the underlying zero coupon bonds.