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This paper introduces a new approach to understanding investment. The distinctive feature of our approach is that shocks to the economic fundamentals have both persistent and transitory components, and that firms must disentangle the persistent from the transitory shocks. The model generates...
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the mathematical modelling of finance and insurance: the theory of stochastic processes, optimal and stochastic control …, stochastic differential equations, convex analysis and duality theory. Five topics are treated in detail: Utility maximization in … incomplete markets; the theory of nonlinear expectations and its relationship with the theory of risk measures in a dynamic …
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