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http://ssrn.com/abstract=1547248
 
 

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International Asset Pricing with Risk-Sensitive Agents


Riccardo Colacito


University of North Carolina Kenan-Flagler Business School

Mariano Massimiliano Croce


University of North Carolina Kenan-Flagler Business School

June 30, 2011


Abstract:     
We propose a frictionless general equilibriummodel in which two international consumers with recursive preferences trade two consumption goods and a complete set of date- and state-contingent securities. Consumption home bias and concern for the temporal distribution of risk generate rich dynamics for international prices and quantities. In our model, exchange rate movements are as volatile as they are in the data. Furthermore, both the volatility of the exchange rate movements and risk premia are endogenously time varying and history dependent.

Number of Pages in PDF File: 41

Keywords: Recursive Preferences, time-varying volatility, international finance, exchange rates

JEL Classification: C62, F31, G12

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Date posted: February 5, 2010 ; Last revised: October 3, 2012

Suggested Citation

Colacito, Riccardo and Croce, Mariano Massimiliano, International Asset Pricing with Risk-Sensitive Agents (June 30, 2011). Available at SSRN: http://ssrn.com/abstract=1547248 or http://dx.doi.org/10.2139/ssrn.1547248

Contact Information

Riccardo Colacito (Contact Author)
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
HOME PAGE: http://www.unc.edu/~colacitr

Mariano Massimiliano Croce
University of North Carolina Kenan-Flagler Business School ( email )
Chapel Hill, NC 27599-3490
HOME PAGE: http://homepages.nyu.edu/~mmc287

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