We consider a Lucas-type exchange economy with two heterogeneous stocks (trees) and a representative investor with constant relative risk aversion. The dividend process for one stock follows a geometric Brownian motion with constant and known parameters. The expected dividend growth rate for the...

In this paper we study the equilibrium in a heterogeneous economy with two groups of investors. Over-confident experts incorrectly assume that their signal for the drift of the dividend process is correlated with the true drift, but interpret the signal otherwise perfectly. Rational laymen avoid...

Model mis-specification can cause substantial utility losses in portfolio planning. In this paper, we compare two approaches to cope with this problem, robust control and learning. We derive the optimal portfolio strategies and the utility losses due to model mis-specification. Surprisingly,...

Model mis-specification can cause substantial utility losses in portfolio planning. In this paper, we compare two approaches to cope with this problem, robust control and learning. We derive the optimal portfolio strategies and the utility losses due to model mis-specification. Surprisingly,...

We analyze the implications of the structure of a network for asset prices in a general equilibrium model. Networks are represented via self- and mutually exciting jump processes, and the representative agent has Epstein-Zin preferences. Our approach provides a flexible and tractable unifying...

This paper deals with the superhedging of derivatives and with the corresponding price bounds. A static superhedge results in trivial and fully nonparametric price bounds, which can be tightened if there exists a cheaper superhedge in the class of dynamic trading strategies. We focus on European...