This paper studies the default anomaly that has been documented in the literature. We show that after controlling for the default-risk premium the default anomaly disappears. In contrast, controlling for credit spreads does not fully eliminate the anomaly. We also relate our results to the IVOL...

We study a two-agent equilibrium model with two goods where we interpret the agents as countries. We analyze the effect of an endogenous habit specification where each country benchmarks its consumption decision against the decision of the other country. We show that endogenous habits can...

We study continuous-time optimal consumption and investment with Epstein-Zin recursive preferences in incomplete markets. We develop a novel approach that rigorously constructs the solution of the associated Hamilton-Jacobi-Bellman equation by a fixed point argument and makes it possible to...

We study consumption-portfolio and asset pricing frameworks with recursive preferences and unspanned risk. We show that in both cases, portfolio choice and asset pricing, the value function of the investor/representative agent can be characterized by a specific semilinear partial differential...

In this article, we study the effects on derivative pricing arising from price impacts by large traders. When a large trader issues a derivative and (partially) hedges his risk by trading in the underlying, he influences both his hedge portfolio and the derivative's payoff. In a Black-Scholes...

We study continuous-time optimal consumption and investment with Epstein-Zin recursive preferences in incomplete markets. We develop a novel approach that rigorously constructs the solution of the associated Hamilton-Jacobi-Bellman equation by a fixed point argument and makes it possible to...

We study continuous-time optimal consumption and investment with Epstein-Zin recursive preferences in incomplete markets. We develop a novel approach that rigorously constructs the solution of the associated Hamilton-Jacobi-Bellman equation by a fixed point argument and makes it possible to...

We study consumption-portfolio and asset pricing frameworks with recursive preferences and unspanned risk. We show that in both cases, portfolio choice and asset pricing, the value function of the investor/representative agent can be characterized by a specific semilinear partial differential...

In this article, we study the effects on derivative pricing arising from price impacts by large traders. When a large trader issues a derivative and (partially) hedges his risk by trading in the underlying, he influences both his hedge portfolio and the derivative's payoff. In a Black–Scholes...

We solve a rich life-cycle model of household decisions involving consumption of perishable goods and housing services, habit formation for housing consumption, stochastic labor income, stochastic house prices, home renting and owning, stock investments, and portfolio constraints. In line with...