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 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 study an equilibrium asset pricing model with several Lucas (1978) trees subject to event risk, that is, the possibility that trees experience unexpected disasters. We exploit the market clearing mechanism, in the presence of multiple positive net supply assets, to show that the implications...

This paper studies the term structure implications of a simple structural model in which the representative agent displays ambiguity aversion, modeled by Multiple Priors Recursive Utility. Bond excess returns reflect a premium for ambiguity, which is observationally distinct from the risk...

This paper studies the termstructure implications of a simple structuralmodel inwhich the representative agent displays ambiguity aversion, modeled by Multiple Priors Recursive Utility. Bond excess returns reflect a premium for ambiguity, which is observationally distinct from the risk premium...

We develop a new framework for multivariate intertemporal portfolio choice that allows us to derive optimal portfolio implications for economies in which the degree of correlation across industries, countries, or asset classes is stochastic. Optimal portfolios include distinct hedging components...

We study the optimal hiring and firing decisions of a firm under two different firing costs regulations: 1) Dual labor markets characterized by high firing costs for workers with seniority above a threshold ("permanent workers") and by low costs for "temporary workers". 2) The Single Labor...

In this paper we study a new factor that matters for fertility and consumption decisions: the risks associated with having and raising a child. We analyze a real options model with incomplete markets to explicitly model both children as a risky investment and the parental option to time...

In this paper we study a new factor that matters for fertility and consumption decisions: the risks associated with having and raising a child. We analyze a real options model with incomplete markets to explicitly model both children as a risky investment and the parental option to time...