This paper presents a business-cycle model with heterogeneous agents that have access to complete markets but face endogenous borrowing and savings constraints. These constraints are motivated by the agents' limited commitment technology. In this environment, aggregate fluctuations are close to...

The first task of this paper is to determine whether heterogeneity in expectation formation is detected from actual economic data. The second task is to measure the extent to which the evolutionary dynamics between different expectation schemes has affected the fluctuations of the data. The...

Recursive Game Theory provides theoretical procedured for computing the equilibrium payoff sets of repeated games and the equilibrium payoff correspondences of dynamic games. These procedures can not be directly implemented on a computer since they involve the computations of objects with...

This paper explores Knightian model uncertainty about dynamic misspecification as a possible explanation of the considerable difference between estimated interest rate rules and optimal feedback descriptions of monetary policy. In the literature on robust control, Knightian uncertainty about a...

In this paper, I compare a two-agent asset-pricing model with the corresponding model with a continuum of agents. In a two-agent economy, interest rates respond to idiosyncratic income shocks because each agent represents half of the population. These interest rate effects facilitate consumption...

As a new branch of economics, chaos economics was born at the first of 1980s. It has been rapidly developed since then. R.H. Day, Stutzer, Benhabib, Shafer, Woof, Woodford, Deneekerre, Poliman and others have done a lot of research work in the field of chaos economics. Even so, there are still...

Vector Autoregressive processes of order p (VAR(p)) with coefficient restrictions can be formulated as a SURE model. The response vectors and the coefficient matrices of the regression equations comprise columns from a Toeplitz matrix. Numerical and computational methods that solve the SURE...

It has been shown in the econometric literature that consistent estimates of consumption-saving models with incomplete markets can be obtained from cross-section data if the model is solved and the observed agents' choices are compared to those predicted by the policy rules.Estimating this class...

We formulate European and American versions of a number of two-factor multiasset options (such as exchange options, quanto options and basket options) in a path integral framework via use of the Chapman-Kolmogorov equation. We show how to evaluate such options using Fourier-Hermite expansions...

This paper provides an extension of the Black-Scholes model for option pricing in which the logarithm of the volatility is assumed to be generated from an Ornstein-Uhlenbeck equation with fractional Riesz-Bessel motion (fRBm) input. The solution of the resulting stochastic differential equation...