This paper provides an alternative approach to Duffie and Lando (2001) for obtaining a reduced form credit risk model from a structural model. Duffie and Lando obtain a reduced form model by constructing an economy where the market sees the manager's information set plus noise. The noise makes...

This paper introduces a dual problem to study a continuous-time consumption and investment problem with incomplete markets and Epstein-Zin stochastic differential utility. Duality between the primal and dual problems is established. Consequently the optimal strategy of this consumption and...

We consider the problem of finding equilibrium asset prices in a financial market in which a portfolio manager (Agent) invests on behalf of an investor (Principal), who compensates the manager with an optimal contract. We extend a model from Buffa, Vayanos and Woolley (2014) by allowing general...

We study existence and uniqueness of continuous-time stochastic Radner equilibria in an incomplete markets model. An assumption of "smallness'' type - imposed through the new notion of "closeness to Pareto optimality'' - is shown to be sufficient for existence and uniqueness. Central role in our...

Errors in survey expectations display waves of pessimism and optimism and significant sluggishness. This paper develops a novel theoretical framework of time-varying beliefs capturing these empirical facts. In our model, the dynamic beliefs arise endogenously due to agents’ attitude toward...

This paper studies the Glosten Milgrom model whose risky asset value admits an arbitrary discrete distribution. Contrast to existing results on insider's models, the insider's optimal strategy in this model, if exists, is not of feedback type. Therefore a weak formulation of equilibrium is...

We study aversion to model ambiguity and misspecification in dynamic portfolio choice. Investors with relative risk aversion gamma 1 fear return persistence, while risk-tolerant investors (0 gamma 1) fear return mean reversion, to confront model misspecification concerns when facing a model...