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...

This paper analyzes the equilibrium pricing implications of contagion risk in a Lucastree economy with recursive preferences and jumps. We introduce a new economic channel allowing for the possibility that endowment shocks simultaneously trigger a regime shift to a bad economic state. We...

We analyze the equilibrium in a two-tree (sector) economy with two regimes. The output of each tree is driven by a jump-diffusion process, and a downward jump in one sector of the economy can (but need not) trigger a shift to a regime where the likelihood of future jumps is generally higher....

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 establish a convergence theorem that shows that discrete-time recursive utility, as developed by Kreps and Porteus (1978), converges to stochastic di erential utility, as introduced by Du e and Epstein (1992), in the continuous-time limit of vanishing grid size

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...