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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

Risk assessment for uncertain cash flows: model ambiguity, discounting ambiguity, and the role of bubbles

Acciaio, Beatrice; Föllmer, Hans; Penner, Irina - London School of Economics (LSE) - 2012

We study the risk assessment of uncertain cash flows in terms of dynamic convex risk measures for processes as introduced in Cheridito et al. (Electron. J. Probab. 11(3):57–106, 2006). These risk measures take into account not only the amounts but also the timing of a cash flow. We discuss...

Persistent link: https://www.econbiz.de/10011071088

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

Practical guide to real options in discrete time II

Boyarchenko, Svetlana; Levendorskii, Sergei - EconWPA - 2005

This paper is an extended version of the paper 'Practical Guide to Real Options in Discrete Time' (http://econwpa.wustl.edu:80/eps/fin/papers/0405/0405016.pdf), where a general, computationally simple approach to real options in discrete time was suggested. We explicitly formulate conditions of...

Persistent link: https://www.econbiz.de/10005413111

Tipping Points and Ambiguity in the Economics of Climate Change

Lemoine, Derek M.; Traeger, Christian P. - National Bureau of Economic Research (NBER) - 2012

We model welfare-maximizing policy in an infinite-horizon setting when the probability of a tipping point, the welfare change due to a tipping point, and knowledge about a tipping point's trigger all depend on the policy path. Analytic results demonstrate how optimal policy depends on the...

Persistent link: https://www.econbiz.de/10010969374

Continuous-Time Methods for Integrated Assessment Models

Judd, Kenneth L.; Lontzek, Thomas S.; Cai, Yongyang - National Bureau of Economic Research (NBER) - 2012

Continuous time is a superior representation of both the economic and climate systems that Integrated Assessment Models (IAM) aim to study. Moreover, continuous-time representations are simple to express. Continuous-time models are usually solved by discretizing time, but the quality of a...

Persistent link: https://www.econbiz.de/10010950988

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 Optimal Policy in a Forward-Looking Model with Parameter and Shock Uncertainty

Giannoni, Marc P. - National Bureau of Economic Research (NBER) - 2006

uncertainty about model parameters and shock processes. We show that the robust optimal policy rule is likely to involve a … uncertainty. Thus parameter uncertainty alone does not necessarily justify a small response of monetary policy to perturbations …. However uncertainty may amplify the degree of "super-inertia" required by optimal monetary policy. We finally discuss the …

Persistent link: https://www.econbiz.de/10005084782

Buridan's Ass and a Menu of Options.

Boyarchenko, Svetlana - EconWPA - 2005

The goal of the paper is to study how a menu of options affects decisions of a rational agent facing uncertainty over …

Persistent link: https://www.econbiz.de/10005550882

Stochastic Dominance Efficiency Tests under Diversification

Kuosmanen, Timo - EconWPA - 2001

This paper focuses on Stochastic Dominance (SD) efficiency in a finite empirical panel data. We analytically characterize the sets of unsorted time series that dominate a given evaluated distribution by the First, Second, and Third order SD. Using these insights, we develop simple Linear...

Persistent link: https://www.econbiz.de/10005561692