This paper extends the literature on the information content of financial variables with respect to future economic growth. It shows that variables originating from both the equity market and the bond market in Switzerland are useful indicators for forecasting the Swiss business cycle. In...

This paper studies the term structure implications of a simple structural economy in which the representative agent displays ambiguity aversion, modeled by Multiple Priors Recursive Utility. Bond excess returns reflect a premium for ambiguity, which is observationally distinct from the risk...

We develop a continuous time general equilibrium yield curve model under ambiguity aversion. A moderate level of ‘aggregate ambiguity’ affects significantly the term structure and can drive the prices of common interest rate derivatives toward the patterns observed in fixed income markets....

In the existing literature on barrier options, much effort has been exerted to ensureconvergence through placing the barrier in close proximity to, or directly onto, thenodes of the tree lattice. In this paper we show that this may not be necessary toachieve accurate option price...

We study the dynamic general equilibrium of an economy where risk averse shareholders delegate the management of the firm to risk averse managers. The optimal contract has two main components: an incentive component corresponding to a non-tradable equity position and a variable ’salary’...

We are interested in the macroeconomic implications of the separation of ownership and control. An alternative decentralized interpretation of the stochastic growth model is proposed, one where shareholders hire a self-interested manager who is in charge of the firm’s hiring and investment...

What is the fundamental value of a stock? Do stock prices deviate from this fundamental value? If yes, do they go back to their fundamental value? This paper proposes to answer these three questions by using a stock valuation model based on the Consumption-Capital Asset Pricing Model (C-CAPM)...

The large spread between equity returns and risk free rates observed in most stock markets (the "equity premium puzzle") has been subject of intense debates. Two main families of models claim to solve this puzzle: habit formation models and loss aversion models. The goal of this paper is to...

Several authors have shown that there exists a significant relationship between the term structure of interest rates and future changes in the rate of inflation. More recently, this relationship has been strengthened through the introduction of nonlinearities and regime shifts. This paper...

Market mechanisms are increasingly being used as a tool for allocating somewhat scarce but unpriced rights and resources, such as air and water. Tradable permits have emerged as the most cost effective measure leading to the emergence of both nationwide (SO2 ) and supranational (CO2 ) emission...