Motivated by economic and empirical arguments, we consider a company whose cash reservoir is affected by macroeconomic conditions. Specifically, we model the cash reservoir as a Brownian motion with drift and volatility modulated by an observable continuous-time Markov chain that represents the...

We show that a possible explanation for the widespread use of options in compensation contracts might be that they provide a way to screen executives. In particular, we consider the problem of a risk-neutral firm that tries to hire a risk-averse executive. There are several types of executives,...

The finance literature has shown that option grants can help to screen out low-ability executives. In this paper we develop a framework that allows us to analyze when options are likely to be optimal for this purpose. We consider a dynamic setting with asymmetric information, in which...

We consider a general continuous-time finite-horizon single-agent consumption and portfolio decision problem with subsistence consumption and value of bankruptcy. Our analysis allows for random market coefficients and general continuously differentiable concave utility functions. We study the...

Motivated by the AIG bailout case in the financial crisis of 2007-2008, we consider an insurer who wants to maximize the expected utility of the terminal wealth by selecting optimal investment and risk control strategies. The insurer's risk process is modelled by a jump-diffusion process and is...

We consider an investor who wants to select her/his optimal consumption, investment and insurance policies. Motivated by new insurance products, we allow not only the financial marke but also the insurable loss to depend on the regime of the economy. The objective of the investor is to maximize...