We analyse a portfolio optimization problem for a long-term investor in the presence of stock market crises. A crisis includes a crash of the stock market price, a sharp increase of its volatility and dramatic deterioration of liquidity. We model the stock market illiquidity by means of convex...

Two-dimensional cellular automaton model has been broadly researched for traffic flow, as it reveals the main characteristics of the traffic networks in cities. Based on the BML models, a first-order phase transition occurs between the low-density moving phase in which all cars move at maximal...

This paper studies the general behavior of the nominal and real term structures of interest rates in a general equilibrium framework. A central bank is introduced in the model as an agent facing a tradeoff between inflation and output and choosing a monetary policy variable. Prices and output...

With the adoption of Regulation Fair Disclosure (Reg FD), market behavior around earnings releases displays no significant change in return volatility (after controlling for decimalization of stock trading) but significant increases in trading volume due to difference in opinion. Analyst...

Miller's hypothesis posits that divergence of opinion can lead to asset overvaluation and subsequent long-term underperformance in markets (such as initial public offerings [IPOs]) with restricted short-selling. Consistent with this hypothesis, we find that early-market return volatility, a...

This paper examines the relationship between a firm's risk-shifting behavior and its default risk. Using contingent-claims approaches, we estimate the market value of a firm's assets, the volatility of asset return, and the associated default risk based on the stock prices and book value of...