We introduce a theoretical model of executives with insider information who receive executive stock options (ESOs) as incentives and optimize their “outside wealth” portfolios. We show that insider information nullifies ESO incentivizing, misaligning executives' and shareholders' interests....

We use a Wicksellian single rotation framework to analyze the impact of the intertemporally fluctuating and stochastic mean-reverting interest rate process on the optimal harvesting threshold and thereby the expected length of the rotation period, when forest value is also stochastic following...

Common integrated assessment models produce the counterintuitive result that higher risk aversion does not lead to stronger near-term abatement. This paper re-examines this result with a DICE model that is fully coupled with a thermohaline circulation model. It also features Epstein-Zin utility...

We present a modification of the most commonly used integrated assessment model (IAM) of climate change (DICE-2016), AD-DICE2016, which is designed to address three key aspects of climateeconomy models: treatment of uncertainty, the use of more appropriate utility functions, and including...

A formula is derived for the social cost of carbon (SCC) that takes account of intragenerational income inequality and its evolution with economic growth. The social discount rate (SDR) should be adjusted to account for intragenerational and intergenerational inequality aversion and for risk...

We consider optimal stopping problems for ambiguity averse decision makers with multiple priors. In general, backward induction fails. If, however, the class of priors is time-consistent, we establish a generalization of the classical theory of optimal stopping. To this end, we develop first...