A financial model is a model designed to represent in mathematical terms the relationships among the variables of a financial problem so that it can be used to make projections and/or answer ‘what if' questions. In particular, financial modeling can be combined with optimization modeling to...

A dynamic economy with markets of equities and bonds is considered. The rational expectations equilibrium is defined in an asset pricing model and a condition under which the Modigliani-Miller theorem holds is shown. In an aggregate model the existence of a rational expectations equilibrium is...