This paper studies a dynamic stochastic general equilibrium model involving climate change. Our model allows for damages on economic growth resulting from global warming. In the calibration, we capture effects from climate change and feedback effects on the temperature dynamics. We solve for the...

In this article, we develop a two-factor model of commodity prices that allows meanreversion in short-term prices and uncertainty in the equilibrium level to which prices revert. Although these two factors are not directly observable, they may be estimated from spot and futures prices....

This paper analyzes and discusses the stable distributional approach in portfolio choice theory. We consider different hypotheses of portfolio selection with stable distributed returns and, more generally, with heavy-tailed distributed returns. In particular, we examine empirical differences...

This paper provides an overview of the real options approach to valuation mainly from the point of view of the author who has worked in this area for over 30 years. After a general introduction to the subject, numerical procedures to value real options are discussed. Recent developments in the...

This paper analyzes and discusses the stable distributional approach in portfolio choice theory. We consider different hypotheses of portfolio selection with stable distributed returns and, more generally, with heavy-tailed distributed returns. In particular, we examine empirical differences...

This paper examines the importance of the regular patterns in the behavior of electricity prices, and its implications for the purposes of derivative pricing. We analyze the Nordic Power Exchange’s spot, futures, and forward prices. We conclude that the seasonal systematic pattern...

Little is known about the joint dynamics of volume across the various contingent claims on the equity market. We study the time-series of trading activity in the cash S&P 500 index and its derivatives (options, the legacy and E-mini futures contracts, and the ETF), and consider their dynamic...

This paper studies the relation between firm value and a firm's growth options. We find strong empirical evidence that (average) Tobin's Q increases with firm-level volatility. However, the significance mainly comes from R&D firms, which have more growth options than non-R&D firms. By...

vThe consumption asset pricing framework implies that asset prices may be used to investigate the properties of consumption. An important property of consumption is its elasticity of intertemporal substitution which measures the willingness of individuals to move consumption between time periods...