We study the destabilising effect of dynamic hedging strategies on the price of the underlying in the presence of sunk costs of transaction. Once sunk costs of transaction are taken into account, continuous portfolio rehedging is no longer an optimal strategy. Using a non-optimising (local in...

We introduce explicitly the effort as a choice variable in a continuous time utility maximisation framework of an executive who is partly compensated with stock options. We solve the model in the case where the executive is not allowed to trade in the company's stock but is able to achieve a...

This paper develops a real option model in which the interaction between debt, liquidation policy and risky investments is studied. We consider a manager who owns the firm and faces the opportunity to invest in risky projects which boost current profits at the cost of bankruptcy if they turn out...

We propose a simple model where large innovation waves arise from the endogenous propagation of information around sectors. Innovators of each sector invest in internal R&D and in local search for information. We show that depending on the structural parameters of the single sectors, some of the...

Recent literature shows how the destabilising effect of portfolio insurance activity on the price of the underlying asset depends on the liquidity of the asset market. We build a simple model where market timers shift capital around asset markets in order to exploit gains from temporary...

The purpose of this paper is to investigate the evolutionary process of imitation and innovation as a process of searching in a given neighbourhood of firms. Networks are the main source of information for firms willing to actively search and upgrade and which define the reachable neighbourhood...

This paper deals with the aggregate effects of small, exogenous but idiosyncratic technological shocks on locally interacting firms. Its main purpose is to model a situation in which technological paradigms emerge through endogenous propagation and diffusion of information leading to an...

We present a model where it can be optimal for rational informed speculators/arbitragers to ride the bubble instead of using their information for stabilising purposes. This result stems from the interaction of speculators with behavioural traders. These latter in each period of time either...

This paper investigates the mechanics through which wealth may, in the long run, trickle down from the rich to the poor. In the presence of indivisibilities in investment of human capital and impossibility of borrowing money, investment in education is financed through an intergenerational...

Technological innovation requires the gathering of information through a process of searching and learning. We distinguish two different but definitely complementary and overlapping ways through which searching and learning occur. The first exploits the spillover potential that lies in a firm's...