We give an explicit PDE characterization for the solution of the problemof maximizing the utility of both terminal wealth and intertemporal consumption under model uncertainty. The underlying market model consists of a risky asset, whose volatility and long-term trend are driven by an external...

This paper explores implications of nominal rigidity characterized by a non-constanthazard function for aggregate dynamics. I derive the NKPC under an arbitrary hazardfunction and parameterize it with the Weibull duration model. The resulting Phillips curveinvolves lagged inflation and lagged...

This paper studies how dierent unionisation structures aect rm productivity, rmperformance, and consumer welfare in a monopolistic competition model with heterogeneousrms and free entry. While centralised bargaining induces tougher selection among hetero-geneous producers and thus increases...

In this paper we develop several regression algorithms for solvinggeneral stochastic optimal control problems via Monte Carlo. Thistype of algorithms is particularly useful for problems with a highdimensionalstate space and complex dependence structure of the underlyingMarkov process with...

Recent studies suggest that the correlation of stock returnsincreases with decreasing geographical distance. However, there is some debateon the appropriate methodology for measuring the effects of distanceon correlation. We modify a regression approach suggested in the literatureand complement...

A firm’s current leverage ratio is one of the core characteristicsof credit quality used in statistical default prediction models. Based on thecapital structure literature, which shows that leverage is mean-reverting to atarget leverage, we forecast future leverage ratios and include them in...

The problem of pricing Bermudan options using Monte Carlo anda nonparametric regression is considered. We derive optimal nonasymptoticbounds for a lower biased estimate based on the suboptimalstopping rule constructed using some estimates of continuationvalues. These estimates may be of...

A deferred annuity typically includes an option-like right for thepolicyholder. At the end of the deferment period, he may either choose toreceive annuity payouts, calculated based on a mortality table agreed to atcontract inception, or receive the accumulated capital as a lump sum.Considering...

We consider the problem of estimating the fractional order of a L´evyprocess from low frequency historical and options data. An estimationmethodology is developed which allows us to treat both estimation andcalibration problems in a unified way. The corresponding procedureconsists of two steps:...