This paper solves for the profit maximising strategy of a durable-goods monopolist when incoming demand varies over time. Each period, additional consumers enter the market; these consumers can then choose whether and when to purchase. We first characterise the consumer's utility maximisation...

We revisit well-known stochastic volatility models with constant coefficients for single asset driven by one factor stochastic volatility as homogeneous diffusion and demonstrate an alternative to the classifications provided in Albanese and Lawi, and Henry-Labord`ere, to deduce asset price...

The purpose of this paper is introducing rigorous methods and formulas for bilateral counterparty risk credit valuation adjustments (CVA's) on interest-rate portfolios. In doing so, we summarize the general arbitrage-free valuation framework for counterparty risk adjustments in presence of...

The number of crossings of the implied volatility function with a fixed level is bounded above by the number of crossings of the risk-neutral density with the density of a log-normal distribution with the same mean as the forward price. It is bounded below by the number of convex payoffs priced...

We explore the implications of ambiguity for the pricing of credit default swaps (CDSs). A model of heterogeneous investors with independent preferences for ambiguity and risk shows that, since CDS contracts are assets in zero net supply, the net credit risk exposure of the marginal investor...

First, we show that implied normal volatility is intimately linked with the incomplete Gamma function. Then, we deduce an expansion on implied normal volatility in terms of the time - value of a European call option. Then, we formulate an equivalence between the implied normal volatility and the...

Can consumption-based mechanisms generate positive and time-varying real term premia as we see in the data? I show that only models with time-varying risk aversion or models with high consumption risk can independently produce these patterns. The latter explanation has not been analysed before...

This paper proposes a simple analysis for examining an agent's optimal decisions in a principal-agency problem. Unlike the standard approach, the target firm's expected return and risk are modeled as a parametric curve in terms of a critical business decision. A general condition is derived for...