Mathematically oriented microeconomic research has contributed enormously to the understanding of economic behavior and the functioning of markets and institutions. However, theoretical as well as applied microeconomic studies may be driven too much by mathematical feasibility. An illustrative...

Dynamic models with inequality constraints pose a challenging prob- lem for two major reasons: Dynamic Programming techniques often necessitate a non established differentiability of the value function, while Euler equation based techniques have problematic or unknown convergence properties....

The attempt to match characteristics of asset pricing models such as the risk-free interest rate, equity premium and the Sharpe ratio for models with instantaneous consumption decisions in the context of stochastic growth models has not been very successful. Many recent versions of asset pricing...

A popular argument states that most of the diversification in a portfolio can be obtained with a rather small number of securities. In this paper we present three algorithms to approach the underlying NP-hard problem of portfolio optimization with a cardinality constraint. All three of these...

Nonlinear infinite horizon continuous time optimization problems are widely used in economics. However numerical solutions necessarily require reformulating the problem into a discrete finite approximation. The method proposed by Mercenier and Michel (1994) minimizes approximation error at...