We present a parsimonious and tractable general equilibrium model featuring acontinuum of overlapping generations, as in Blanchard (1985). In addition, we assumethat agents have standard utilities exhibiting constant relative risk aversion and canbe born with differing risk aversions and...

This paper studies the extent to which risk-taking incentives of CEOs and other governancefeatures in a range of years prior to the recent financial crisis were related to the write-downsof U.S. financial institutions during the crisis. We document that institutions whose CEOs hadparticularly...

The pricing kernel puzzle is the observation that the pricing kernelmight be increasing in some range of the market returns. This paperanalyzes the pricing kernel in a nancial market equilibrium. If mar-kets are complete and investors are risk-averse and have common andtrue beliefs, the pricing...

The recent real estate bubble was fuelled by non-risk adjusted lending policies, low interest rates and complex finance vehicles. Mortgage-backed securities (MBS) played a crucial role in the crisis. These vehicles were praised as liquid capital market instruments that allowed mortgage lenders...

This paper addresses the issue of intergenerational and internationalsharing of longevity and growth risks. Current research on worldwidedemographic changes highlights the importance of longevity risk on financialmarkets and the need to devise optimal hedging vehicles. We present a...

A simple consumption-based two-period model is used to study the (theoretical)effects of disagreement on asset prices. Analytical and numerical results showthat individual uncertainty has a much larger effect on risk premia than disagreementif (i) the risk aversion is reasonably high and (ii)...

We prove that, in a heterogeneous economy with scale invariantutilities, the yield of a long term bond is determined by the agent with maximalexpected marginal utility.We also prove that the same result holds for the longterm forward rates.Furthermore, we apply Cramer’s large deviations...

We establish universal bounds for asset prices in heterogeneouscomplete market economies with scale invariant preferences. Namely, for eachagent in the economy we consider an artificial homogeneous economy, popu-lated solely by this agent and calculate the ”homogeneous” price of an asset...