The assumption of the complete market simplifies the whole theory of arbitrage pricing theory since the pioneering work of Black and Scholes. The martingale approach is one of the most powerful tool for pricing derivative securities in the complete market. The existence of such a market,...

In an influential paper, Engel and West (2005) claim that the near random-walk behavior of nominal exchange rates is an equilibrium outcome of a variant of present-value models when economic fundamentals follow exogenous first-order integrated processes and the discount factor approaches one....

In an influential paper, Engel and West (2005) claim that the near random-walk behavior of nominal exchange rates is an equilibrium outcome of a variant of present-value models when economic fundamentals follow exogenous first-order integrated processes and the discount factor approaches one....