... examined by Liu and Pan (2003), Liu, Longstaff, and Pan (2003) and Das and Uppal (2001). Dufresne and Hugonnier (2001) study the impact of event risk on pricing and hedging ofcontingent claims.The ... anonymous referee, and seminar participants at CMU, Texas Austin, MD, the 2002 NBER summerinstitute, the 2003 AFA meetings, the Cleveland Fed Workshop on Robustness, and UIUC for helpfulcomments. ... consumption and J is his indirect utility function, and where fc and fVare first derivatives of f with respect to c and V, respectively. Applying this result toour case, and setting the optimal...