volume 9, issue 2, P427-455 2003
DOI: 10.1017/s1357321700004232
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T. C. Jenkins

Abstract: ABSTRACTThe paper introduces a setting in which each business in an economy faces considerable uncertainty about the cost of providing its service and therefore needs risk capital to give consumers confidence in its solvency. The paper then explores the operation of the capital market under conditions where businesses charge for this service dependability by setting an entity specific profit margin.This entity specific profit margin is associated with an optimal, arbitrage-free investment portfolio for investo…

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