We consider a pure exchange economy consisting of a single risky asset whose dividend drift rate is modelled by an Ornstein-Uhlenbeck process, and a representative agent with power-utility who, in equilibrium, consumes the dividend paid by the risky asset. Endogenously determined interest rates...

What percentage of their portfolio should investors allocate to hedge funds? The only available answers to the above question are set in a static mean-variance framework, with no explicit accounting for uncertainty on the active manager's ability to generate abnormal return, and usually generate...

We construct an intertemporal equilibrium with two agents with heterogeneous beliefs. Heterogeneity of beliefs induces volatility of the interest rate. We study the effect of financial innovation on interest rate volatility and conclude that, in a setting of asymmetric beliefs, introducing the...

This paper is concerned with nonlinear filtering of the coefficients in asset price models with stochastic volatility. More specifically, we assume that the asset price process S=(St)t≥0 is given by dSt=m(θt)St dt+v(θt)St dBt, where B=(Bt)t≥0 is a Brownian motion, v is a positive...

In the framework of continuous-time, Itô processes models for financial markets, we study the problem of maximizing the probability of an agent's wealth at time T being no less than the value C of a contingent claim with expiration time T. The solution to the problem has been known in the...

This paper presents an equilibrium model in a pure exchange economywhen investors have three possible sources of heterogeneity. Investorsmay differ in their beliefs, in their level of risk aversion andin their time preference rate. We study the impact of investors heterogeneityon equilibrium...

We provide a representation for the nonmyopic optimal portfolio of an agentconsuming only at the terminal horizon when the single state variable follows ageneral diusion process and the market consists of one risky asset and a risk-freeasset. The key term of our representation is a new object...