In a stylized Robinson Crusoe economy, we demonstrate the usefulness of homogeneity in initial conditions when solving and analyzing macroeconomic models. In a first step, we define state-like and control-like variables. In a second step, we introduce the value-function-like function. While the...

This paper proposes a closed-form solution for pricing an American put option on a non-dividend paying stock based on an optimally early-exercise strategy. An American put option should be early-exercised when the maximum option premium of early exercise is not less than the value of its...

This article addresses to the appropriate modeling of loss given default (LGD) for the retail business sector. We assume small or mid-size loans that are assigned in a standardized way and collateralized by residential or commercial property. The focus on this specific type of loans entails two...

This paper introduces population growth in the Uzawa–Lucas model, analyzing the implications of the choice of the welfare criterion on the model's outcome. Traditional growth theory assumes population growth to be exponential, but this is not a realistic assumption (see Brida and Accinelli,...

Bucci et al. (J Econ 103:83–99, <CitationRef CitationID="CR3">2011</CitationRef>) argue that under two parametric restrictions, there exists a closed-form solution path to the two-sector endogenous growth model of Lucas–Uzawa. However, they assume that the value function is a function of both the current and the initial values of the...</citationref>

In this paper we discuss a new approach to extend a class of solvable stochastic volatility models (SVM). Usually, classical SVM adopt a CEV process for instantaneous variance where the CEV parameter γ takes just few values: 0—the Ornstein–Uhlenbeck process, 1/2—the Heston (or square...

The optimal dividend problem is a classic problem in corporate finance though an early contribution to this problem can be traced back to the seminal work of an actuary, Bruno De Finetti, in the late 1950s. Nowadays, there is a leap of literature on the optimal dividend problem. However, most of...

This paper provides a methodology for valuing a basket Loan CDS (LCDS) by considering both default and prepayment risks. Under ¡°top down¡± and intensity framework, using a single-factor model, correlated default and prepayment risks are considered, where the stochastic interest rate is used...

This paper provides a closed-form solution for the price-dividend ratio in a standard asset pricing model with stochastic volatility. The growth rate of the endowment is a first-order Gaussian autoregression, while the stochastic volatility innovations can be drawn from any distribution for...