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Anderson, Ronald W.; Carverhill, Andrew - C.E.P.R. Discussion Papers - 2005

We study a continuous time model of a levered firm with fixed assets generating a cash flow that fluctuates with business conditions. Since external finance is costly, the firm holds a liquid (cash) reserve to help survive periods of poor business conditions. Holding liquid assets inside the...

Persistent link: https://www.econbiz.de/10005123584

Unlocking Value: Equity Carve outs as Strategic Real Options

Perotti, Enrico C; Rossetto, Silvia - C.E.P.R. Discussion Papers - 2007

Equity carve outs, the partial listing of a corporate subsidiary, appear to be transitory arrangements, usually dissolved within a few years by either a complete sale or a buy back. Why do firms perform expensive listings just to reverse them thereafter? We interpret carve outs as strategic...

Persistent link: https://www.econbiz.de/10005124241

Hedging and Vertical Integration in Electricity Markets

Aïd, René; Chemla, Gilles; Porchet, Arnaud; Touzi, Nizar - C.E.P.R. Discussion Papers - 2011

This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and vertical integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and vertical...

Persistent link: https://www.econbiz.de/10008925710

Solving Heterogeneous-Agent Models with Parameterized Cross-Sectional Distributions

Algan, Yann; Allais, Olivier; Den Haan, Wouter - C.E.P.R. Discussion Papers - 2007

disadvantages of the prevailing algorithm that strongly relies on simulation techniques and is easier to implement than existing … possible to avoid Monte Carlo integration. The paper also develops a new simulation procedure that not only avoids cross … finite number of agents. This procedure can help to improve the efficiency of the most popular algorithm in which simulation …

Persistent link: https://www.econbiz.de/10005114163

Bank Networks: Contagion, Systemic Risk and Prudential Policy

Aldasoro, Iñaki; Delli Gatti, Domenico; Faia, Ester - C.E.P.R. Discussion Papers - 2015

We present a network model of the interbank market in which optimizing risk averse banks lend to each other and invest in non-liquid assets. Market clearing takes place through a tâtonnement process which yields the equilibrium price, while traded quantities are determined by means of a...

Persistent link: https://www.econbiz.de/10011252622

Finite State Dynamic Games with Asymmetric Information: A Framework for Applied Work

Fershtman, Chaim; Pakes, Ariel - C.E.P.R. Discussion Papers - 2009

With applied work in mind, we define an equilibrium notion for dynamic games with asymmetric information which does not require a specification for players' beliefs about their opponent types. This enables us to define equilibrium conditions which, at least in principal, are testable and can be...

Persistent link: https://www.econbiz.de/10005016241

Do Voters Vote Sincerely?

Degan, Arianna; Merlo, Antonio - C.E.P.R. Discussion Papers - 2007

In this paper we address the following question: To what extent is the hypothesis that voters vote sincerely testable or falsifiable? We show that using data only on how individuals vote in a single election, the hypothesis that voters vote sincerely is irrefutable, regardless of the number of...

Persistent link: https://www.econbiz.de/10005662163

Risk Matters: The Real Effects of Volatility Shocks

Fernández-Villaverde, Jesús; Guerron-Quintana, Pablo A.; … - C.E.P.R. Discussion Papers - 2009

This paper shows how changes in the volatility of the real interest rate at which small open emerging economies borrow have a quantitatively important effect on real variables like output, consumption, investment, and hours worked. To motivate our investigation, we document the strong evidence...

Persistent link: https://www.econbiz.de/10005666783

Assessing the Accuracy of the Aggregate Law of Motion in Models with Heterogeneous Agents

Den Haan, Wouter - C.E.P.R. Discussion Papers - 2008

This paper shows that the R² and the standard error have fatal flaws and are inadequate as accuracy tests for models with heterogeneous agents and aggregate risk. Using data from a Krusell-Smith economy, I show that approximations for the law of motion of aggregate capital for which the true...

Persistent link: https://www.econbiz.de/10005791220

Finite State Dynamic Games with Asymmetric Information: A Framework for Applied Work

Fershtman, Chaim; Pakes, Ariel - C.E.P.R. Discussion Papers - 2005

We present a framework for the applied analysis of dynamic games with asymmetric information. The framework consists of a definition of equilibrium, and an algorithm to compute it. Our definition of Applied Markov Perfect equilibrium is an extension of the definition of Markov Perfect...

Persistent link: https://www.econbiz.de/10005791237

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