We introduce the class of linear-rational term structure models in which the state price density is modeled such that bond prices become linear-rational functions of the factors. This class is highly tractable with several distinct advantages: i) ensures nonnegative interest rates, ii) easily...

We develop a real options model of Ramp;D valuation, which takes into account the uncertainty in the quality of the research output, the time and cost to completion, and the market demand for the Ramp;D output. The model is then applied to study the problem of pharmaceutical under-investment in...

The recent literature has derived simple formulas for the Social Cost of Carbon (SCC) that are easy to interpret, but that only apply to the global economy. This is an issue since international transfers to sustain the global optimum with the same carbon price for all countries are still lacking...

This paper studies a dynamic stochastic general equilibrium model involving climate change. Our frame- work allows for feedback effects on the temperature dynamics. We are able to match estimates of future temperature distributions provided in the fifth assessment report of the IPCC (2014). We...

We develop a real options model of R&D valuation, which takes into account the uncertainty in the quality of the research output, the time and cost to completion, and the market demand for the R&D output. The model is then applied to study the problem of pharmaceutical under-investment in R&D...

There is much discussion in the literature about the resources society should commit to ameliorate the effects of climate change. The optimal greenhouse gas abatement strategy has a direct relation to the social cost of carbon (SCC) which measures the externalities incurred in emitting one ton...