This paper extends the method of discounted cash flows to value investment projects through incorporating real options. It is assumed the cash flows generated by the firm are correlated with macroeconomic fundamentals, particularly with the interest rate. It is also assumed that the cash flows...

This research develops, under the assumption of complete markets, a stochastic model that explains the decision making process of a rational consumer-investor selecting a portfolio in a market risk environment subject to his budget constraint. The proposed model is developed in the framework of...

This paper develops, under the framework of a small, open, and monetary economy, a stochastic model of inflation stabilization taking as a nominal anchor the exchange rate when credibility is imperfect. The agents have expectations driven by two processes: a diffusion-jump process for the...

The aim of this paper is to show the convenience of using mathematical tools from quantum mechanics to solve some financial problems. In particular, the Vasicek short-rate model in continuous time is discussed in the framework of the Feynman path integral. To do this, the Lagrangian of the...

The use of equilibrium models in economics springs from the desire for parsimonious models of economic phenomena that take human reasoning into account. This approach has been the cornerstone of modern economic theory. We explain why this is so, extolling the virtues of equilibrium theory; then...

Spanish Abstract: En este trabajo se presenta un marco teórico que conjunta y ordena sistemáticamente, en cuanto a complejidad y realismo, varios modelos disponibles en la literatura especializada para estimar la distribución de la volatilidad de los rendimientos diarios de indices...

En este articulo se presenta de manera completa, rigurosa y compacta, la teoria clasica de las finanzas (TF). No pretende introducir teoremas novedosos, sino solo entretejerlos usando un metodo que nunca ha sido utilizado en la demostracion de representaciones de utilidad: el teorema de Tarski...

This study investigates the real options with spatial analysis in China's real estate markets. We employ new detailed macro-level data set for 31 provinces in China to test the central predictions of real options with respect to land development. We extended the real options method with spatial...

We study the asset pricing implications of Tversky and Kahneman's (1992) cumulative prospect theory, with particular focus on its probability weighting component. Our main result, derived from a novel equilibrium with non-unique global optima, is that, in contrast to the prediction of a standard...

In 2009, the Federal Reserve Board implemented a survey of families that participated in the 2007 Survey of Consumer Finances (SCF) to gain detailed information on the effects of the recent recession on all types of households. Using data from the 2007-09 SCF panel, we highlight the variation in...