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Equilibrium Asset Pricing in Directed Networks
(2018-10-16)
Directed links in cash flow networks affect the cross-section of price exposures and market prices of risk in equilibrium. In an asset pricing model featuring mutually exciting jumps, we measure directedness through an ...
Optimal Carbon Abatement in a Stochastic Equilibrium Model with Climate Change
(2018-09-24)
This paper studies a dynamic stochastic general equilibrium model involving climate change. Our framework allows for feedback effects on the temperature dynamics. We are able to match estimates of future temperature ...
Predictors and Portfolios Over the Life Cycle
(2018-06-08)
In a calibrated consumption-portfolio model with stock, housing, and labor income predictability, we evaluate the welfare effects of predictability on life-cycle consumption-portfolio choice. We compare skilled investors ...
Consumption-Portfolio Choice with Preferences for Cash
(2018-07-12)
This paper studies a consumption-portfolio problem where money enters the agent's utility function. We solve the corresponding Hamilton-Jacobi-Bellman equation and provide closed-form solutions for the optimal consumption ...
Optimal Taxes on Capital in the OLG Model with Uninsurable Idiosyncratic Income Risk
(2018-02-09)
We characterize the optimal linear tax on capital in an Overlapping Generations model with two period lived households facing uninsurable idiosyncratic labor income risk. The Ramsey government internalizes the general ...
Volatility-of-Volatility Risk
(2018-05-01)
We show that time-varying volatility of volatility is a significant risk factor which affects the cross-section and the time-series of index and VIX option returns, beyond volatility risk itself. Volatility and ...
Only Time will Tell: A Theory of Deferred Compensation
(2018-08-09)
This paper provides a complete characterization of optimal contracts in principal-agent settings where the agent's action has persistent effects. We model general information environments via the stochastic process of the ...
Pricing Sin Stocks: Ethical Preference vs. Risk Aversion
(2018-06-14)
We develop a model that reproduces the average return and volatility spread between sin and non-sin stocks. Our investors do not necessarily boycott sin companies. Rather, they are open to invest in any company while trading ...
Networks in Risk Spillovers: A Multivariate GARCH Perspective
(2018-08-01)
We propose a spatiotemporal approach for modeling risk spillovers using time-varying proximity matrices based on observable financial networks and introduce a new bilateral specification. We study covariance stationarity ...
Asset Pricing in OLG Economies With Borrowing Constraints and Idiosyncratic Income Risk
(2018-09-17)
This paper analyzes how the combination of borrowing constraints and idiosyncratic risk affects the equity premium in an overlapping generations economy. I find that introducing a zero-borrowing constraint in an economy ...