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A Critique of the Literature on the US Financial Debt Crisis

Stein, Jerome L. - CESifo - 2010

A healthy financial system encourages the efficient allocation of capital and risk. The collapse of the house price bubble led to the financial crisis that started in 2007. There is a large empirical literature concerning the relation between asset price bubbles and financial crises. I evaluate...

Persistent link: https://www.econbiz.de/10008534053

Application of Stochastic Optimal Control to Financial Market Debt Crises

Stein, Jerome L. - CESifo - 2009

literature in mathematical finance concerning optimal portfolio allocation and stopping rules? The uncertainty concerns the …

Persistent link: https://www.econbiz.de/10005094473

A Tale of Two Debt Crises: A Stochastic Optimal Control Analysis

Stein, Jerome L. - CESifo - 2008

Banks should evaluate whether a borrower is likely to default. I apply several techniques in the extensive mathematical literature of stochastic optimal control/dynamic programming to derive an optimal debt in an environment where there are risks on both the asset and liabilities sides. The...

Persistent link: https://www.econbiz.de/10005406070

Dark Clouds or Silver Linings? Knightian Uncertainty and Climate Change

Chen, Yu-Fu; Funke, Michael; Glanemann, Nicole - CESifo - 2011

This paper examines the impact of Knightian uncertainty upon optimal climate policy through the prism of a continuous … Knightian uncertainty accelerates climate policy, i.e. policymakers become more reluctant to postpone the timing of climate …

Persistent link: https://www.econbiz.de/10009221550

Global Warming and a Potential Tipping Point in the Atlantic Thermohaline Circulation: The Role of Risk Aversion

Belaia, Mariia; Funke, Michael; Glanemann, Nicole - CESifo - 2014

circulation model. It also features Epstein-Zin utility and uncertainty about climate sensitivity that resolves after some time …

Persistent link: https://www.econbiz.de/10010886106

Exchange Rate Uncertainty and Labour Market Adjustment under Fixed and Flexible Exchange Rates

Chen, Yu-Fu; Funke, Michael - CESifo - 2002

The standard literature on working time has modelled the decisions of firms in a deterministic framework in which firms can choose between employment and overtime (given mandated standard hours). Contrary to this approach, we follow the real options approach, which allows us to investigate the...

Persistent link: https://www.econbiz.de/10005766184

Booms, Recessions and Financial Turmoil: A Fresh Look at Investment Decisions under Cyclical Uncertainty

Chen, Yu-Fu; Funke, Michael - CESifo - 2009

The paper studies the interaction between cyclical uncertainty and investment in a stochastic real option framework … of the link between cyclical uncertainty and investment is quantified using simulations of the model. The chief …

Persistent link: https://www.econbiz.de/10005013955

The Value of a Statistical Life under Ambiguity Aversion

Treich, Nicolas - CESifo - 2008

We show that ambiguity aversion increases the value of a statistical life as soon as the marginal utility of wealth is higher if alive than dead. The intuition is that ambiguity aversion has a similar effect as an increase in the perceived baseline mortality risk, and thus operates as the...

Persistent link: https://www.econbiz.de/10005406403

Once Upon a Time Preference - How Rationality and Risk Aversion Change the Rationale for Discounting

Traeger, Christian - CESifo - 2012

future utility when uncertainty increases over time. The more we know about the future welfare consequences of our (in …)actions, the more weight they receive. If uncertainty is endogenous to the decision process, the new rationale for discounting will …

Persistent link: https://www.econbiz.de/10010544183

Why Uncertainty Matters - Discounting under Intertemporal Risk Aversion and Ambiguity

Traeger, Christian - CESifo - 2012

Uncertainty has an almost negligible impact on project value in the economic standard model. I show that a … comprehensive evaluation of uncertainty and uncertainty attitude changes this picture fundamentally. The analysis relies on the … and with respect to non-risk uncertainty. The paper derives the resulting changes of the risk-free and the stochastic …

Persistent link: https://www.econbiz.de/10009645646