Recent empirical studies conclude that small firms have higher but more variable growth rates than large firms. To explore the effect of this size-dependence regularity on moral hazard and investment, we develop a continuous-time agency model with time-varying firm size. Firm size is a diffusion...

We study a continuous-time optimal consumption and portfolio selection problem when an economic agent with recursive utility has stochastic income and debt-to-income borrowing limits. The optimal portfolio depends on the elasticity of intertemporal substitution (EIS) due to the borrowing...

We study a finite horizon optimal contracting problem with limited commitment. A risk-neutral principal enters into an insurance contract with a risk-averse agent who receives a stochastic income stream and is unable to make commitment to keep the contract. This problem involves an infinite...