A general equilibrium model is defined from the works of Lucas [1978] and Campbell [1986]. Within the framework of this model, we establish various explicit formulas for bond pricing: zero-coupon options, interest rate options, coupon bond options, floating rate coupon bonds. The formulas so...

We study the problem of a risk-neutral decision-maker who has to choose among two alternative investment projects of different scales under output price uncertainty. We provide parameter restrictions under which the optimal investment strategy is not a trigger strategy and the optimal investment...

We model the financing, cash holdings, and hedging policies of a firm facing financing frictions and subject to permanent and transitory cash flow shocks. We show that permanent and transitory shocks generate distinct, sometimes opposite, effects on corporate policies and use the model to...