We develop a new framework for intertemporal portfolio choice when the covariance matrix of returns is stochastic. An important contribution of this framework is that it allows to derive optimal portfolio implications for economies in which the degree of correlation across different industries,...

We propose a multivariate nonparametric technique for generating reliable shortterm historical yield curve scenarios and confidence intervals. The approach is based on a Functional Gradient Descent (FGD) estimation of the conditional mean vector and covariance matrix of a multivariate interest...

Control problems with Recursive Multiple-Priors Utility (RMPU) are higly non-linear so that RMPU asset prices have been studied in very simple exchange economies only. We identify a continuous-time exchange equilibrium with Locally-Constrained-Entropy RMPU (LCE-RMPU) that is tractable even in...

We develop a continuous time general equilibrium yield curve model under ambiguity aversion. Even a moderate level of 'aggregate ambiguity' affects significantly the term structure and can drive the prices of common interest rate derivatives toward the patterns observed in fixed income markets....

We propose a new modeling framework to study the asset pricing implications of learning under ambiguity aversion. In a continuous time partial information Lucas economy, we characterize analytically equilibrium equity returns and make the following observations. First, learning under ambiguity...

We solve analytically the Merton's problem of an investor with timeadditive power utility. For general state dynamics, we prove existence of two power series representations of the relevant optimal policies and value functions, which hold for all admissible risk aversion parameters. We...