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In the standard real options approach to investment under uncertainty, agents formulate optimal policies under the assumptions of risk neutrality or complete financial markets. Although these assumptions are crucial to the implications of the approach, the ...
A new approach for the estimation of bid-rent functions for location choice is proposed. The method considers that the expected maximum bid in the auction of a good is a latent variable than can be related to observed prices for similar goods. The model ge ...
This article describes how prices are treated in economic theory. Section 17.2 begins by introducing the concepts of ‘rational preference’ and ‘utility function’, which are standard building blocks of models that attempt to explain choice behaviour. Sectio ...
We extend Kyle's (1985) model of insider trading to the case where liquidity provided by noise traders follows a general stochastic process. Even though the level of noise trading volatility is observable, in equilibrium, measured price impact is stochasti ...
When investors have incomplete information, expected returns, as measured by an econometrician, deviate from those predicted by standard asset pricing models by including a term that is the product of the stock's idiosyncratic volatility and the investors' ...
We evaluate financial assets with payoffs linked to individual labor income, as conceived by Shiller (2003) and others. Using a realistically calibrated life-cycle model, we find that such assets can generate nontrivial welfare benefits, depending on the p ...
Regulators charged with monitoring systemic risk need to focus on sentiment as well as narrowly defined measures of systemic risk. This chapter describes techniques for jointly monitoring the co-evolution of sentiment and systemic risk. To measure systemic ...
This paper reviews topics in price theory such as rational choice, Walrasian equilibria, complete and incomplete markets, externalities and nonmarket goods, strategic pricing with complete and incomplete information, and some behavioral anomalies. Contains ...
Pricing is considered an effective management policy to reduce traffic congestion in transportation networks. In this paper we combine a macroscopic model of traffic congestion in urban networks with an agent-based simulator to study congestion pricing sch ...
This article provides the mathematical foundation for stochastically continuous affine processes on the cone of positive semidefinite symmetric matrices. This analysis has been motivated by a large and growing use of matrix-valued affine processes in finan ...
