This interdisciplinary paper explains how mathematical techniques of stochastic optimal control can be applied to the recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large literature in mathematical finance concerning optimal...

Discounting has to take account of ecosystem services in consumption and production. Previous literature focuses on the first aspect and shows the importance of the relative price effect, for given growth rates of consumption and ecosystem services. This paper focuses on intermediate ecosystem...

We characterise the entire set of symmetric stationary Markov-perfect Nash equilibria (MPE) in a differential game of public good investment, using the canonical problem of climate change as an example. We provide a sufficient and necessary condition for MPE and show how the entire set of MPE is...

Using the Hamilton-Jacobi-Bellman equation, we derive both a Keynes-Ramsey rule and a closed form solution for an optimal consumption-investment problem with labor income. The utility function is unbounded and uncertainty stems from a Poisson process. Our results can be derived because of the...

We characterise the entire set of symmetric stationary Markov-perfect Nash equilibria (MPE) in a differential game of public good investment, using the canonical problem of climate change as an example. We provide a sufficient and necessary condition for MPE and show how the entire set of MPE is...

Discounting has to take account of ecosystem services in consumption and production. Previous literature focuses on the first aspect and shows the importance of the relative price effect, for given growth rates of consumption and ecosystem services. This paper focuses on intermediate ecosystem...

The social rate of discount is a crucial driver of the social cost of carbon (SCC), i.e. the expected present discounted value of marginal damages resulting from emitting one ton of carbon today. Policy makers should set carbon prices to the SCC using a carbon tax or a competitive permits...

The social rate of discount is a crucial driver of the social cost of carbon (SCC), i.e. the expected present discounted value of marginal damages resulting from emitting one ton of carbon today. Policy makers should set carbon prices to the SCC using a carbon tax or a competitive permits...

A healthy financial system encourages the efficient allocation of capital and risk. The collapse of the house price bubble led to the financial crisis that started in 2007. There is a large empirical literature concerning the relation between asset price bubbles and financial crises. I evaluate...