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A theory of endogenous time preference, and discounted utility anomalies

Boyarchenko, Svetlana; Levendorskii, Sergei - EconWPA - 2005

function and underlying uncertainty. We provide analytic expressions and numerical examples for discount factors assuming … simple utility functions and gaussian uncertainty. …

Persistent link: https://www.econbiz.de/10005135046

General option exercise rules, with applications to embedded options and monopolistic expansion

Boyarchenko, Svetlana; Levendorskii, Sergei - EconWPA - 2005

technology, the other - demand uncertainty. The impact of these factors on new technology adoption is analyzed. It is shown that … depending on the situation and type of uncertainty, the diffusion uncertainty and jump uncertainty can produce opposite effects. …

Persistent link: https://www.econbiz.de/10005076973

Robust expectations and uncertain models – A robust control approach with application to the New Keynesian economy

Kilponen, Juha - EconWPA - 2004

This paper extends Svensson and Woodford’s (2003) partial information framework by allowing the private agents to achieve robustness against incomplete information about the structure of the economy by distorting their expectations in a particular direction. It shows how a linear rational...

Persistent link: https://www.econbiz.de/10005125627

Time and nodal decomposition with implicit non-anticipativity constraints in dynamic portfolio optimization

Barro, Diana; Canestrelli, Elio - EconWPA - 2005

We propose a decomposition method for the solution of a dynamic portfolio optimization problem which fits the formulation of a multistage stochastic programming problem. The method allows to obtain time and nodal decomposition of the problem in its arborescent formulation applying a discrete...

Persistent link: https://www.econbiz.de/10005125637

Optimal stopping made easy

Boyarchenko, Svetlana; Levendorskiy, Sergey - EconWPA - 2004

the underlying uncertainty is modelled as a random walk on a lattice. The method of the paper is based on the use of the …

Persistent link: https://www.econbiz.de/10005134695

Real options and the universal bad news principle

Boyarchenko, Svetlana; Levendorskii, Sergei - EconWPA - 2004

incorporates non-technological uncertainty. The former factor follows a process with upward jumps. The impact of these factors on …

Persistent link: https://www.econbiz.de/10005134751

American options: the EPV pricing model

Boyarchenko, Svetlana; Levendorskii, Sergei - EconWPA - 2004

We explicitly solve the pricing problem for perpetual American puts and calls, and provide an efficient semi-explicit pricing procedure for options with finite time horizon. Contrary to the standard approach, which uses the price process as a primitive, we model the price process as the expected...

Persistent link: https://www.econbiz.de/10005134771

Practical guide to real options in discrete time

Boyarchenko, Svetlana; Levendorskii, Sergei - EconWPA - 2004

Continuous time models in the theory of real options give explicit formulas for optimal exercise strategies when options are simple and the price of an underlying asset follows a geometric Brownian motion. This paper suggests a general, computationally simple approach to real options in discrete...

Persistent link: https://www.econbiz.de/10005134883

Discount factors ex post and ex ante, and discounted utility anomalies

Boyarchenko, Svetlana; Levendorskii, Sergei - EconWPA - 2005

, waiting is valuable because uncertainty is revealed over time. The fair price (or compensation) that the individual agrees to … depend on the utility function and underlying uncertainty. After the decision of exchange had been made, valuation ex post … discount factors assuming different utility functions and models of uncertainty, and demonstrate that our explanation of …

Persistent link: https://www.econbiz.de/10005135039

Consumption Dynamics under Information Processing Constraints

Luo, Yulei - EconWPA - 2005

This paper studies consumption dynamics and welfare losses under information processing constraints (it is also called 'rational inattention' (RI) in Sims (2003)) in the permanent income hypothesis (PIH) model. It is shown that incorporating RI into the otherwise standard PIH model can...

Persistent link: https://www.econbiz.de/10005412598

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