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Heterogeneous Information Arrival and Option Pricing
Asea, Patrick K.; Ncube, Mthuli - National Bureau of Economic Research (NBER) - 1997
stochastic mechanism. We explore the implications for pricing stock, index and foreign currency options of the assumption that … accounting for heterogeneous information arrival may minimize the ubiquitous pricing bias 'smile-effect' of standard option … pricing models. We propose a conceptually simple but numerically intensive maximum likelihood estimator of the parameters of a …
Persistent link: https://www.econbiz.de/10005830224
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Bankruptcy and Collateral in Debt Constrained Markets
Kehoe, Timothy J.; Levine, David - National Bureau of Economic Research (NBER) - 2006
Typical models of bankruptcy and collateral rely on incomplete asset markets. In fact, bankruptcy and collateral add contingencies to asset markets. In some models, these contingencies can be used by consumers to achieve the same equilibrium allocations as in models with complete markets. In...
Persistent link: https://www.econbiz.de/10005061561
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International Financial Integration and Crisis Contagion
Devereux, Michael B.; Yu, Changhua - National Bureau of Economic Research (NBER) - 2014
International financial integration helps to diversify risk but also may increase the trans- mission of crises across countries. We provide a quantitative analysis of this trade-off in a two-country general equilibrium model with endogenous portfolio choice and collateral con- straints....
Persistent link: https://www.econbiz.de/10010950927
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Asset Pricing with Countercyclical Household Consumption Risk
Constantinides, George M.; Ghosh, Anisha - National Bureau of Economic Research (NBER) - 2014
We present evidence that shocks to household consumption growth are negatively skewed, persistent, countercyclical, and play a major role in driving asset prices. We construct a parsimonious model where heterogeneous households have recursive preferences and a single state variable drives the...
Persistent link: https://www.econbiz.de/10010951334
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Solving General Equilibrium Models with Incomplete Markets and Many Assets
Evans, Martin; Hnatkovska, Viktoria V. - National Bureau of Economic Research (NBER) - 2005
This paper presents a new numerical method for solving general equilibrium models with many assets. The method can be applied to models where there are heterogeneous agents, time-varying investment opportunity sets, and incomplete markets. It also can be used to study models where the...
Persistent link: https://www.econbiz.de/10005248974
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Putting the Brakes on Sudden Stops: The Financial Frictions-Moral Hazard Tradeoff of Asset Price Guarantees
Mendoza, Enrique G.; Durdu, C. Bora - National Bureau of Economic Research (NBER) - 2004
this financial frictions-moral hazard tradeoff using an equilibrium asset-pricing model in which margin constraints …
Persistent link: https://www.econbiz.de/10005084668
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Evaluating Asset Pricing Models with Limited Commitment using Household Consumption Data
Krueger, Dirk; Lustig, Hanno; Perri, Fabrizio - National Bureau of Economic Research (NBER) - 2007
We evaluate the asset pricing implications of a class of models in which risk sharing is imperfect because of limited … enforcement of intertemporal contracts. Lustig (2004) has shown that in such a model the asset pricing kernel can be written as a … identify unconstrained households, to estimate the pricing kernel implied by these models and evaluate their performance in …
Persistent link: https://www.econbiz.de/10005084749
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Human Capital Risk, Contract Enforcement, and the Macroeconomy
Krebs, Tom; Wright, Mark; Kuhn, Moritz - National Bureau of Economic Research (NBER) - 2011
We develop a macroeconomic model with physical and human capital, human capital risk, and limited contract enforcement. We show analytically that young (high-return) households are the most exposed to human capital risk and are also the least insured. We document this risk-insurance pattern in...
Persistent link: https://www.econbiz.de/10009403425
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Asymptotic Methods for Asset Market Equilibrium Analysis
Judd, Kenneth L.; Guu, Sy-Ming - National Bureau of Economic Research (NBER) - 2001
General equilibrium analysis is difficult when asset markets are incomplete. We make the simplifying assumption that uncertainty is small and use bifurcation methods to compute Taylor series approximations for asset demand and asset market equilibrium. A computer must be used to derive these...
Persistent link: https://www.econbiz.de/10005710656
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Irreversible Investment, Real Options, and Competition: Evidence from Real Estate Development
Mayer, Christopher; Bulan, Laarni; Somerville, C. Tsuriel - National Bureau of Economic Research (NBER) - 2006
We examine the extent to which uncertainty delays investment and the effect of competition on this relationship using a sample of 1,214 condominium developments in Vancouver, Canada built from 1979-1998. We find that increases in both idiosyncratic and systematic risk lead developers to delay...
Persistent link: https://www.econbiz.de/10005714148