In the macroeconomic literature, the implications of a context with household heterogeneity and incomplete financial markets have been mostly studied under the assumption that households own the physical capital and undertake the intertemporal investment decision. Further, firms rent capital and...

Many recent papers in macroeconomics have studied the implications of models with household heterogeneity and incomplete financial markets under the assumption that households own the stock of physical capital and undertake the intertemporal investment decisions. In these models, production...

This dissertation considers the pricing and hedging of contingent claims in a generalsemimartingale market. Initially the focus is on a complete market, where it ispossible to price uniquely and hedge perfectly. In this context the two fundamentaltheorems of asset pricing are explored. The...

We document widespread violations of stochastic dominance by one-month S&P 500 index call options market over 1986-2006. These violations imply that a trader can improve her expected utility by engaging in a zero-net-cost trade. We allow the market to be incomplete and also imperfect by...

An economy faces an unknown individual risk, such as the health effects of a recently discovered environmental hazard. Opinions may be widely different about the distribution of risks across the population. We study financial markets that suffice to reach efficient allocations in this situation....

We study endogenous uncertainty stemming from the introduction of new financial assets, so as to evaluate the risks as well as the welfare gains of financial innovation. The introduction of financial assets to hedge individual risk can lead to the risk of default, which is a collective risk. The...

An economy faces an unknown individual risk, such as the health effects of recently discovered environmental hazard. Opinions may be widely different about the distribution of risks across the population. We study financial markets that suffice to reach efficient allocations in this situation....

We present a derivative pricing and estimation methodology for a class of stochastic volatility models that exploits the observed 'bursty' or persistent nature of stock price volatility. Empirical analysis of high-frequency S&P 500 index data confirms that volatility reverts slowly to its mean...

This paper derives and draws on simple formulae for the upper and lower bounds to the value of a series of risky cash flows in order to provide some instructive insights in the impact of taxation on these bounds.The formulae are based on no-arbitrage conditions in a setting that is a...