文档介绍：Intermediate Financial Theory Danthine and Donaldson Additional Exercises2Chapter 1 . Assume a 2 goods-2 agents economy and well-behaved utility functions. Explain why petitiveequilibrium should be on the contract curve. . What is unusual in Figure 1 below? Is there a PO allocation ? Can it be obtained as petitive equilibrium ? What is the corresponding assumption of the 2nd theorem of welfare, and why is it important? Figure : The Edgeworth-Bowley Box: An Unusual Configuration Good 2Good 1Agent 1Agent2 I2I1A3Chapter 4 . If you are exposed to a 50/50 probability of gaining or losing CHF 1'000 and an insurance that removes the risk costs CHF 500, at what level of wealth will you be indifferent between taking the gamble or paying the insurance? That is, what is your certainty equivalent wealth for this gamble? Assume that your utilityfunction is U(Y) = -1/Y. What would the solution be if the utility function were logarithmic? . Assume that you have a logarithmic utility function on wealth U(Y)=lnY and that you are faced with a 50/50 probability of winning or losing CHF 1'000. How much will you pay to avoid this risk if your current level of wealth is CHF 10'000? How much would you pay if your level of wealth is CHF 1'000'000? Did you expect that the premium you were willing to pay would increase/decrease? Why? . Assume that security returns are normally distributed. Compare portfolios A and B, using both first and second-order stochastic dominance : Case 1 Case 2 Case 3 babaEE=σ>σbabaEE>σ=σbabaEE<σ< agent faces a risky situation in which he can lose some amount of money with probabilities given in the following table: Loss Probability 1000 10% 2000 20% 3000 35% 5000 20% 6000 15% This agent has a utility function of wealth of the form 21Y)Y(U1+γ?=γ?His initial wealth level is 10000 and his γ is equal to . a. Calculate the certainty equivalent of this prospect for this agent. Calculate the ri