Monetary policy has pursued the concept of inflation targeting. This has been implemented in many countries. Here interest rates are supposed to respond to an inflation gap and output gap. Yet, recently monetary policy, in particular in the US after the subprime and the credit crises, the...

In this paper we study the extent to which the financial market has contributed to wealth disparities. To that end we introduce a stochastic dynamic model of wealth accumulation with preferences, consumption and portfolio choice, which roughly replicates the long-term evolution of assets under...

This paper introduces a benchmark model for financial markets, which is based on the unique characterization of a benchmark portfolio that is chosen to be the growth optimal portfolio. The general structure of risk premia for asset prices and portfolios is derived. Furthermore, the short rate is...

The paper proposes a financial market model that generates stochastic volatility and stochastic interest rate using a minimal number of factors that characterise the dynamics of the different denominations of the deflator. It models asset prices essentially as functionals of square root and...