DF Lunch Seminar with Prof. Ansgar Walther, Oxford University

With the Lunch Seminar series, the Department of Finance is bringing eminent and up-and-coming researchers from around the world to Luxembourg.

Abstract:

This paper develops probability pricing, extending cash flow pricing to measure the

willingness-to-pay for changes in probabilities. The value of a change in probabilities

can be expressed as a cash flow pricing formula for an asset with hypothetical cash flows

derived from changes in the survival function. This cash flow equivalent formulation

provides a way to construct hedging strategies and decompose probability prices

into expected-payoff and risk-compensation components. Our four applications study

the valuation of changes in the distribution of aggregate consumption, the efficiency

effects of changes in performance noise in principal-agent problems, and the welfare

implications of changes in public and private information.

More about Prof. Walther:

The seminar will be held in person.

This event is supported by the Luxembourg National Research Fund (RESCOM/2025/LE/19440690)