This paper studies asset pricing implications of heterogeneity across capital inputs. We build a general equilibrium model including two types of capital. The agents in our economy have Epstein and Zin (1989) preferences and technology is exposed to long-run risks in productivity growth....

This paper studies the effect of persistent growth risks on the solution accuracy of dynamic stochastic general equilibrium models. We compare the reliability of perturbation and projection based solution methods for various model economies. We find that a perturbation based solution method does...

This paper studies macroeconomic consequences of oil price shocks caused by innovations in the monopoly power in the oil market. Monopoly power is interpreted as oil producers' ability to charge a markup over marginal costs. We propose a novel way to identify markup shocks based on meetings of...

We study a quantitative DSGE model linking a state of the art asset pricing framework à la Kung and Schmid (2015) with a constraint on leverage as in Gertler and Kiyotaki (2010). We show that a mere increase in the probability of firms being financially constrained leads to an increase in risk...

We study a quantitative DSGE model linking a state of the art asset pricing framework a la Kung and Schmid (2015) with a constraint on leverage as in Gertler and Kiyotaki (2010). We show that a mere increase in the probability of firms being financially constraint leads to an increase in risk...

Investors pay a substantial premium to hedge against fluctuations in volatility—the variance risk premium (VRP). The asset-pricing literature has presented numerous models with jumps in economic fundamentals to reproduce the properties and the time variation of the VRP. This paper shows that...

This paper studies the role of generalized disappointment aversion (GDA) in reconciling several asset-pricing puzzles in models of long-run risks. To fully capture the nonlinearities introduced by these preferences, we solve the model globally with projection. This allows us to scrutinize the...

The analysis of dynamic economic models routinely leads to the mathematical problem of determining an unknown function for which no closed-form solution exists. Economists must then resort to methods of numerical approximation when analyzing such models. Among the computational methods that have...