This paper investigates the effects of the issuance of retail products with non-linear payoffs on option prices. For a given underlying asset, when the outstanding volume of products embedding a short-put position increases, implied volatility at the corresponding strike decreases. A similar...

This paper assesses the contribution of monetary policy to the dynamics of bond real returns. We assume that the monetary authority controls the short-term nominal interest rate. We then model exogenously the joint dynamics of the aggregate endowment and the monetary policy variable, and...

We explore the role of monetary policy in a world of segmented financial markets, where only the agents who trade stocks encounter financial income risk. In such an economy, the welfare maximizing monetary policy attains the novel role of sharing the financial market risk traders face, among all...

This paper investigates how volatile the general price level can be in an equilibrium where all uncertainty is extrinsic. The government operates a lump-sum redistribution policy using fiat money. An approach to modeling asset market segmentation is introduced in which this tax policy determines...