In this paper we present two dynamic models of background risk. We first present a stochastic factor model with an additive background risk. Thereafter, we present a dynamic model of simultaneous (correlated) multiplicative background risk and additive background risk. In so doing, we use a...

In this paper, we analyze the impacts of joint energy and output prices uncertainties on the inputs demands in a mean-variance framework. We find that the concepts of elasticities and variance vulnerability play important roles in the comparative statics analysis. If the firms' preferences...

We overcome a long-standing obstacle in statistics. In doing so, we show that the distribution of the sum of log-normal variables is log-normal. Furthermore, we offer a breakthrough result in finance. In doing so, we introduce a simple, exact and explicit formula for pricing the arithmetic Asian...

We overcome a long-standing obstacle in statistics. In doing so, we show that the distribution of the sum of log-normal variables is log-normal. Furthermore, we offer a breakthrough result in finance. In doing so, we introduce a simple, exact and explicit formula for pricing the arithmetic Asian...

We present a new method of estimating the asset stochastic volatility and return. In doing so, we overcome some of the limitations of the existing random walk models, such as the GARCH/ARCH models.

We present a new model of forward dynamic utilities. In doing so, we provide unique (viscosity) solutions. In addition, we introduce Hausdorff-continuous viscosity solutions to the portfolio model.

We devise an estimation methodology which allows preferences estimation and comparative statics analysis without a reliance on Taylor’s approximations and the indirect utility function.