In this paper we present empirical facts on oil exploitation and a model that can replicate some of these facts. In particular, we show that the time path of the oil price, on the one hand, and the extraction rate, on the other hand, seem to follow a U-shaped and an inverted U-shaped...

The study of asset price characteristics of stochastic growth models such as the risk-free interest rate, equity premium, and the Sharpe-ratio has been limited by the lack of global and accurate methods to solve dynamic optimization models. In this paper, a stochastic version of a dynamic...

The aim of this paper is to develop an optimal long-term bond investment strategy which can be applied to real market situations. This paper employs Merton’s intertemporal framework to accommodate the features of a stochastic interest rate and the time-varying dynamics of bond returns. The...

The accuracy of the solution of dynamic general equilibrium models has become a major issue. Recent papers, in which second-order approximations have been substituted for first-order, indicate that this change may yield a significant improvement in accuracy. Second order approximations have been...