The attempt to match characteristics of asset pricing models such as the risk-free interest rate, equity premium and the Sharpe ratio for models with instantaneous consumption decisions in the context of stochastic growth models has not been very successful. Many recent versions of asset pricing...

The paper studies creditworthiness in a model with endogenous credit cost and debt constraints. Such a model can give rise to multiple candidates for steady state equilibria. We use new analytical techniques such as dynamic programming (DP) with flexible grid size to find solutions and to locate...

This paper presents a new approach to solve dynamic decision models in economics. The proposed procedure, called Nonlinear Model Predictive Control (NMPC), relies on the iterative solution of optimal control problems on finite time horizons and is well established in engineering applications for...

Following the lead of Merton (1974), recent research has focused on the relationship of credit risk to firm value. Although this has usually been done for a single firm, the growth of structured finance, which necessarily involves the correlation between included securities, has spurred interest...

Using standard preferences for asset pricing has not been very successful to match asset price characteristics such as the risk-free interest rate, equity premium and the Sharpe ratio to time series data. Behavioral finance has recently proposed more realistic preferences such as preferences...

The accuracy of the solution of dynamic general equilibrium models has become a major issue. Recent papers, in which second-order approximations have been substituted for first-order, indicate that this change may yield a significant improvement in accuracy. Second order approximations have been...

The study of asset price characteristics of stochastic growth models such as the risk-free interest rate, equity premium, and the Sharpe-ratio has been limited by the lack of global and accurate methods to solve dynamic optimization models. In this paper, a stochastic version of a dynamic...

We apply set valued analysis techniques in order to characterize the input-to-state dynamical stability (ISDS) property, a variant of the well known input-to-state stability (ISS) property. Using a suitable augmented differential inclusion we are able to characterize the epigraphs of minimal...