The Froot-Stein Model Revisited
Oliver B. Linton
University of Cambridge
Jens Perch Nielsen
City University London - Cass Business School
We investigate the model of Froot and Stein (1998), a model that has very strong implications for risk management. We argue that their conclusions are too strong and need to be qualified. Also, there are some unusual consequences of their model, which may be linked to the chosen pricing formula.
Number of Pages in PDF File: 10
Keywords: Capital allocation; risk management; second order condition
JEL Classification: G20, G31, G32working papers series
Date posted: January 13, 2004
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