There is strong evidence that interest rates and bond yield movements exhibit both stochastic volatility and unanticipated jumps. The presence of frequent jumps makes it natural to ask whether there is a premium for jump risk embedded in observed bond yields. This paper identifies a class of...

This paper constructs a model that describes inflation cycles and prolonged depression as generated by the learning behavior of households who face a random liquidity shock in which money is needed. Households update the subjective probability of the shock based on the observation and change...

One approach to oil markets is to treat oil as an asset, besides its role as a commodity. Speculative and nonspeculative activity by investors in the derivatives markets could be responsible for a sizable increase in oil prices. This paper recognizes both the consumption and investment aspects...

The aim of this paper is to present large deviation results for some telegraph random motions. We are not aware of any other results of this kind except the ones for the classical telegraph process (with drift). We start with the large deviation principle of the conditional laws given the number...

We present processes on stock exchange as two random processes one of which reflects the regular regime of economy and the other one–crises. If regular processes are correctly recognized with the probability slightly higher than 1/2, this gives positive average gain to the player. We believe...

Suppose one could expend effort to prevent probabilistic transition to an adverse state, and also effort to expedite probabilistic transition to a beneficial state. Bearing in mind that the efforts occur in different states, should these efforts substitute or complement? Two appealing arguments...