Appropriate modeling of the process of volatility has implications for portfolio selection, the pricing of derivative securities and risk management. Further, a large body of research has suggested that both long memory and structural changes simultaneously characterize the structure of...

Endogenous Uncertainty is that component of economic risk and market volatility which is propagated within the economy by the beliefs and actions of agents. The theory of Rational Belief (see Kurz [1994]) permits rational agents to hold diverse beliefs and consequently, a Rational Belief...

Successful descriptions of short-term nominal interest rates inertial behavior have frequently been obtained with small scale macro models in which a Central Banker minimizes a loss function embedding an argument labelled as interest rate smoothing. The rationale for this argument is not...

Existing no trade results are based on the common prior assumption (CPA). This paper identifies a strictly weaker condition than the CPA under which speculative trade is impossible in a rational expectations equilibrium (REE). As our main finding, we demonstrate the impossibility of speculative...

This paper introduces an equilibrium concept for boundedly rational agents who base their demand-supply decisions on incorrect price anticipations. Formally, we differentiate between equilibrium and out-of-equilibrium states. If the agents attach zero prior probability to all out-of-equilibrium...

The present paper investigates the functioning of an Emission Trading System (ETS) and its impact on the diffusion of environmental-friendly technological innovation in the presence of firms’ strategic behaviours and sanctions to non-compliant firms. For this purpose, we study an evolutionary...