Banking reform has proved to be one of the most problematic elements of economic transition in central and Eastern Europe. Therefore the paper considers the development of the Estonian banking sector and derives individual banks ́fragility scores during transition. To this end we use...

This paper addresses the issue of how regulatory constraints affect firm's investment choices when the firm has the option to delay investment. The RPI-x rule is compared to a profit sharing rule, which increases the x factor in case profits go beyond a given level. It is shown that these rules...

Though a lot of work has been done on the distribution of job tenures, we are still uncertain about its main determinants. In this paper, we stress random shocks to match productivity after the start of an employment relation. The specificity of investment makes hiring and separation decisions...

Multiplicative growth processes that are subject to random shocks often have a skewed distribution of outcomes. In a number of incentivized laboratory experiments we show that a large majority of participants either strongly underestimate skewness or ignore it completely. Participants...

In this article we use contingent-claim analysis to calculate the effective tax rate (ETR) under corporate debt finance. In particular, we deal with both pure debt and two of the most well-known hybrid securities, i.e., convertible, and reverse convertible bonds. We show that: 1) effective...

This article deals with the integration of taxes into real option-based investment models under risk neutrality and risk averison. It compares the possible approaches dynamic programming and contingent claims analysis to analyze their effects on the optimal investment rules before and after...

This paper considers the problem of model uncertainty in the case of multi-asset volatility models and discusses the use of model averaging techniques as a way of dealing with the risk of inadvertently using false models in portfolio management. In particular, it is shown that under certain...

This paper introduces the probabilistic formulation of continuous-time economic models: forward stochastic differential equations (SDE) govern the dynamics of backward-looking variables, and backward SDEs capture that of forward-looking variables. Deep learning streamlines the search for the...

Generative Artificial Intelligence (AI) holds the potential to either complement knowledge workers by increasing their productivity or substitute them entirely. We examine the short-term effects of the recent release of the large language model (LLM), ChatGPT, on the employment outcomes of...