In a market with a safe rate and a risky asset that pays a continuous dividend stream depending on a latent state of the economy, several agents make consumption and investment decisions based on public information — prices and dividends — and private signals. We obtain the equilibrium in...

Health-care slows the natural growth of mortality, indirectly increasing utility from consumption through longer lifetimes. This paper solves the problem of optimal dynamic consumption and healthcare spending with isoelastic utility, when natural mortality grows exponentially to reflect the...

This paper investigates the optimal investment and consumption problem in a continuous-time financial market for investors with power utility on consumption, who face partially hedgeable interest rate risk. With no analytical solution to the optimal strategies, closed-form approximate strategies...

Investing on behalf of a firm, a trader can feign personal skill by committing fraud that with high probability remains undetected and generates small gains, but that with low probability bankrupts the firm, offsetting ostensible gains. Honesty requires enough skin in the game: if two traders...

Time-varying asset returns lead highly risk-averse investors to choose market-timing exposures that increase in their horizon, in agreement with the common advice to reduce risk with age, but in contrast to theoretical work that prescribes constant portfolio weights. In a market where an...

In a continuous-time model with multiple assets described by cadlag processes, this paper characterizes superhedging prices, absence of arbitrage, and utility maximizing strategies, under general frictions that make execution prices arbitrarily unfavorable for high trading intensity. With such...

When the planning horizon is long, and the safe asset grows indefinitely, iso-elastic portfolios are nearly optimal for investors who are close to iso-elastic for high wealth, and not too risk averse for low wealth. We prove this result in a general arbitrage-free, frictionless, semi-martingale...

In a complete market, we find optimal portfolios for an investor whose satisfaction stems from both a payoff's intrinsic utility and its comparison with a reference, as specified by Köszegi and Rabin. In the regular regime, arising when reference-dependence is low, the marginal utility of the...

In the high-frequency limit, conditional expected increments of fractional Brownian motion converge to a white noise, shedding their dependence on the path history and the forecasting horizon, and making dynamic optimization problems tractable. We find an explicit formula for locally...