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Identifier to cite or link to this item: https://hdl.handle.net/10086/26448

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Title
Moral-Hazard Premium
Creator
Creator Name
Misumi, Takashi Misumi, Takashi
三隅, 隆司 三隅, 隆司
Affiliation
Affiliation Name
Hitotsubashi University
Creator Name
Nakamura, Hisashi Nakamura, Hisashi
中村, 恒 中村, 恒
Creator Alternative
Hitotsubashi University
Creator Name
Takaoka, Koichiro Takaoka, Koichiro
高岡, 浩一郎 高岡, 浩一郎
Affiliation
Affiliation Name
Hitotsubashi University
Key Word
moral hazard
asset prices
rare-event risk
regular market risk
riskless rate
JEL
D51
D82
G12
Abstract
This paper provides an explicit asset-pricing formula in a continuous-time generalequilibrium exchange economy in the presence of moral hazard. Specifically, it solves an optimal consumption/wealth allocation problem of a representative lender in financial markets under regular market risk and rare-event risk when an endowment process is subject to a firm manager’s moral hazard. Consequently, it shows that, under the moral-hazard problem, a positive premium is stipulated on a riskless rate in market equilibrium – call it a moral-hazard premium – due to the necessity to give the manager an incentive to avoid his opportunistic misbehavior.
Publisher
Hitotsubashi University Center for Financial Research
Issued Date
2014-03-12
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
Working Paper Series ; No. G-1-7
Number of Pages
40
Appears in Collections
Working Paper Series / Hitotsubashi University Center for Financial Research
URL
https://hdl.handle.net/10086/26448