This paper assesses the quantitative impact of ambiguity on the historically observed financial asset returns and prices. The single agent, in a dynamic exchange economy, treats the conditional uncertainty about the consumption and dividends next period as ambiguous. We calibrate the agent's...

This paper investigates the success of the well-known reverse-shooting and forward-shooting algorithms in finding stable solutions for linear macroeconomic models that both possess the particular property known as saddle-path instabiity and also have highly cyclic dynamic properties. It is...

This is a draft Chapter from a book by the authors on “Levy Driven Volatility Modelsâ€.

We discuss computational aspects of likelihood-based estimation of unvariate ARFIMA (p,d,q) models. We show how efficient computation and simulation is feasible, even for large samples. We also discuss the implementation of analytical bias corrections.

We infer unobserved strategies from the observed actions of buyers in posted-offer market experiments to evaluate their effectiveness against a monopolist. While the strategies of one-quarter of the buyers in our experiments correspond to the game-theoretic prediction of passive price-taking,...

This paper examines the efficiency of stock based compensation by valuing stock and options from the executive`s point of view. Companies give compensation in the form of stock in order to align incentives by providing a link between executive wealth and the stock price performance of the...

The exchange between Epstein (2010) and Klibanoff et al. (2012) identified a behavioral issue that sharply distinguishes between two classes of models of ambiguity sensitivity, exemplified by the Î±-MEU model and the smooth ambiguity model, respectively. The issue in question is whether a...

Consider a finite data set where each observation consists of a bunde of contingent consumption chosen by an agent from a constraint set of such bundles.  We develop a general procedure for testing the consistency of this data set with a broad class of models of choice under risk and under...

This paper studies how capital-scarce countries should manage volatile resource income.  Existing literature recommends that capital-scarce countries invest domestically, but that volatile resource income should be saved in a foreign sovereign wealth fund.  I reconcile these by combining a...

The global response to a catastrophic shock to productivity which becomes more imminent with global warming is to have carbon taxes to curb the risk of a calamity and to accumulate precautionary capital to facilitate smoothing of consumption.  Our multi-region model of growth and climate change...