Technology choice allows for substitution of production across states of nature and depends on state dependent risk aversion. In equilibrium, endogenous technology choice can counter a persistent negative productivity shock with an increase in investment. An increase in risk aversion intensifies...

We solve analytically a pure exchange general equilibrium model with a continuum of agents that agree to disagree on how they interpret information. Disagreement fluctuates with information quality and the disagreement model is estimated using data on professional forecasts. We fi nd that...

For the first time in the literature, we derive an analytic expression for the representative agent of a fairly general class of economies populated by agents with catching up with the Joneses preferences, but with heterogeneous risk-aversion. As Chan and Kogan (2002) show numerically, the...

A model is presented with counter-cyclical belief heterogeneity and habit-formation preferences. Belief heterogeneity stems from disagreement in the interpretation of common signals. The model accounts for the positive relation between the magnitude of returns and trading volume, the asymmetric...

Risk management has undergone a remarkable transformation over the past fifteen years, with most new methods having been designed for the concerns of large institutions operating in well-developed financial markets. This paper addresses a problem faced by smaller institutions operating in...

Dynamic asset pricing models typically do not generate trading volume whereas empirically trading volume is strongly related to asset prices; volume is usually high when returns are high and during periods of high return volatility. Stock prices on the other hand are known to be quite volatile...

This report explains why the handling of the Emergency Liquidity Assistance (ELA) of the Laiki Bank with the March 25th Eurogroup decision by which the entire liability (about 9.2 billion Euros) is passed onto the Bank of Cyprus (BoC), as part of the "good" Laiki, is illegal and bad for the...

The Cypriot banking system has suffered a severe blow last Friday night, after the results of the Eurogroup meeting were announced. Life in the banking system is different since Saturday morning: solutions that were feasible until last Friday (e.g. bank resolutions) might not be feasible this...