This paper studies the optimal central bank intervention of interest rate problem, where the interest rate process is modelled by an Ornstein—Uhlenbeck (mean-reverting) process with a slowly varying stochastic volatility. The objective of the central bank is to maintain the interest rate close...

We model a risk-averse firm owner who wants to maximize the intertemporal expected utility of firm’s dividends. The optimal dynamic control problem is characterized by two stochastic state variables: the equity value, and profitability (ROA) of the _rm. According to the empirical evidence, we...

This paper elaborates on the alternative measure of persistence recently suggested in Marques (2004), which is based on the idea of mean reversion. A formal distinction between the "unconditional probability of a given process not crossing its mean in period t" and its estimator, is made clear...