We present the optimal consumption and investment strategy for an investor, endowed with labor income, searching to maximize utility from consumption and terminal wealth when facing a binding capital constraint of a European (constraint on terminal wealth) or an American (constraint on the...

We present the optimal consumption and investment strategy for an investor, endowed with labor income, searching to maximize utility from consumption and terminal wealth when facing a binding capital constraint of a European (constraint on terminal wealth) or an American (constraint on the...

This study analyzes a continuous-time N-agent Brownian hidden-action model with exponential utilities, in which agents' actions jointly determine the mean and the variance of the outcome process. In order to give a theoretical justi¯cation for the use of linear contracts, as in Holmstrom and...

U.S. Treasury Securities are crucially important in many areas of finance. However, zero-coupon yields are not observable in the market. Even though published zero-coupon yields exist, they are sometimes not available for certain research topics or for high frequency. Recently, high frequency...

The binomial model has been used to price a wide variety of equity and interest rate options for more than two decades. Originally developed by Cox, Ross, and Rubinstein to clarify the basic pricing principle of its continuous-time counterpart with reduced mathematical requirements, the approach...

In the past decades several versions of the binomial model for option pricing, originally introduced by Cox, Ross, and Rubinstein, have been discussed in the finance literature. Some of these approaches model an arbitrage-free market in the discrete setup whereas others attain this property only...