ABSTRACT
The objective of this chapter is to develop a general equilibrium model to examine the consumption and investment decisions of an international investor and to study the stochastic behavior of equilibrium prices of international assets, equilibrium interest rates and exchange rates. These issues are explored within the framework of intertemporal, continuous-time and multi-good open economies with fully integrated real and financial markets under a regime of flexible exchange rates. More specifically, we are concerned about pricing risks present in a production-exchange international economy.
