We consider an intertemporal economy with liquidity constrained and unconstrained individuals. A liquidity constraint prevents marketability of future income and thus endogenously generates market incompleteness. In contrast with the existing literature on portfolio constraints, our liquidity...

Unlike European-type derivative securities, there are no simple analytic valuation formulas for American options, even when the underlying asset price has constant volatility. The early exercise feature considerably complicates the valuation of American contracts. The strategy taken in this...

We consider a pure exchange representative agent economy with perishable and durable commodities in which the durable good provides status as well as services. We examine the effects of the durable's attributes on demands and equilibrium prices. When the attributes are perfect substitutes...

This paper provides (i) new results on the structure of optimal portfolios, (ii) economic insights on the behavior of the hedging components and (iii) an analysis of simulation-based numerical methods. The core of our approach relies on closed form solutions for Melliavin derivatives of...

We examine intertemporal asset pricing when short sales are constrained in proportion to the value of an investor's portfolio. All assets' prices exceed every investor's marginal utility of consumption-based valuation of the associated dividends if every investor finds himself constrained in...

This paper provides a survey of recent numerical methods for pricing derivative securities. Methods for standard American options on a single underlying asset, barrier and lookback options and options on multiple assets are reviewed. Criteria for comparison of different approaches are discussed....

This paper studies the limit distributions of Monte Carlo estimators of diffusion processes. Two types of estimators are examined. The first one is based on the Euler scheme applied to the original processes; the second applies the Euler scheme to a variance-stabilizing transformation of the...

This paper examines the valuation of European- and American-style volatility options based on a general equilibrium stochastic volatility framework. Properties of the optimal exercise region and of the option price are provided when volatility follows a general diffusion process. Explicit...

This paper studies the conditions for aggregation, portfolio separation and effective completeness of competitive allocations in general equilibrium models with incomplete markets in which agents have general preference and endowment distributions. We show that these properties are distinct....