Essays on Ambiguity, Market Incompleteness, and Asset Pricing

This dissertation comprises three chapters in the field of asset pricing. The first
chapter revisits Izhakian (2020)’s theoretical framework of ambiguity measurement
and identifies flaws in both the asymptotic expansions for distorted probabilities
under ambiguity and the separation of ambiguity and ambiguity attitude, which
make the proposed ambiguity measurement unreliable. The second chapter
proposes a model-based method to quantify the level of ambiguity in the stock
market, which is applied to the U.S. option data. The third chapter empirically
quantifies the degree of market incompleteness for the U.S. market in a modelfree way and explores the relation between the degree of market incompleteness
and the index option return.