How should one evaluate investment projects whose CCAPM betas are uncertain? This question is particularly crucial for projects yielding long-lasting impacts on the economy, as is the case for example for many green investments. We define the notion of a certainty equivalent beta. We show that...

Data in which each observation is a curve occur in many applied problems. This paper explores prediction in time series in which the data is generated by a curve-valued autoregression process. It develops a novel technique, the predictive factor decomposition, for estimation of the...

In this paper we study corporate debt values, capital structure, and the term structure of interest rates in a unified framework. We employ numerical techniques to compute the firm's optimal capital structure and the value of its long-term risky debt and yield spreads when the value of the...

Because of the uncertainty about how to model the growth process of our economy, there is still much confusion about which discount rates should be used to evaluate actions having long-lasting impacts, as in the contexts of climate change, social security reforms or large public infrastructures...

In this paper we develop a new way of modelling time variation in term premia. This is based on the stochastic discount factor model of asset pricing with observable macroeconomic factors. The joint distribution of excess holding period US bond returns of different maturity and the fundamental...

It is not immediately clear how to discount distant-future events, like climate change, when the distant-future discount rate itself is uncertain. The so-called “Weitzman-Gollier puzzle” is the fact that two seemingly symmetric and equally plausible ways of dealing with uncertain future...

We propose a multivariate nonparametric technique for generating reliable historical yield curve scenarios and confidence intervals. The approach is based on a Functional Gradient Descent (FGD) estimation of the conditional mean vector and volatility matrix of a multivariate interest rate...

Recent empirical studies have demonstrated that behaviour of interest rate processes can be better explained if standard diffusion processes are augmented with jumps in the interest rate process. In this paper we examine the performance of both linear and non-linear one factor CKLS model in the...