In this paper, we examine an exchange economy with a financial market composed of three assets: a share of a stock, an European call option written on the stock, and a riskless bond. The financial market is assumed to be incomplete and the option is not a redundant asset. In such a case the...

In this paper we analyze a dynamic, asset pricing model where an arbitrary number of heterogeneous, procedurally rational investors divide their wealth between two assets. Both fundamental dividend process and behavior of traders are modeled in a very general way. In particular, agents' choices...

This paper aims at increasing our insights into the way financial markets respond to news. We view the market as a (nonlinear) filter of news on fundamentals. A stylized version of this situation is obtained by considering by a time dependent dividend rate which is driving the market. To model...

This paper extends the well known Capital Asset Pricing Model by Sharpe and Lintner to a multi-period context with possibly price dependent preferences. The model is built from individual forward looking agents adopting a portfolio selection scheme similar to the portfolio selection theory...

This paper develops and solves a general equilibrium business cycle model with on-the-job search and wage rigidity arising from long-term labor contracts. Labor search models without these features have been criticized for failing to generate procyclical movements in job vacancies and...