In this paper we consider the option value of the environment employing a general equilibrium growth model with a stochastic technology. In our model, as in existing studies, because of irreversibility, the environment has significant real option value. However, unlike the existing literature in...

This paper proposes a preference-based general equilibrium model that explains the pricing of the S&P 500 index options since the 1987 market crash. The central ingredients are a peso component in the consumption growth rate and the time-varying risk aversion induced by habit formation that...

This paper proposes a preference-based general equilibrium model that explains various pricing features of currency and currency options. The central ingredients are i) a variable disaster component that is highly but imperfectly shared across countries, and ii) the separation of EIS from risk...

This paper proposes a preference-based general equilibrium model that explains various pricing features of currency and currency options. The central ingredients are i) a variable disaster component that is highly but imperfectly shared across countries; and ii) the separation of EIS from risk...