Limit Orders and Knightian Uncertainty

• 成果类型: Article; Early Access
• 署名作者: Greinecker, Michael; Kuzmics, Christoph
• 署名单位: University of Graz
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.1111/iere.70015
• 发表日期: 2025
• 关键词: ambiguity aversion literature; expected utility; randomization; RISK; REPRESENTATION; preferences; CHOICE; games; MODEL

摘要

A wide variety of financial instruments allows risk-averse traders to reduce their exposure to risk. This raises the question of what financial instruments allow ambiguity-averse traders to reduce their exposure to ambiguity. We show in this paper that price-contingent orders, such as limit orders, are sufficient: In a two-period trading model, an ambiguity-averse trader who trades with limit orders is observationally indistinguishable from an ambiguity-neutral trader with the same risk preferences.