In this paper, I compare the accuracy of the two existing methods for solving stochastic general equilibrium models with dynamic portfolio choice and incomplete markets: one proposed by Hnatkovska (2010) and Evans and Hnatkovska (2005, 2011) (EH), another - attributed to Devereux and Sutherland...

This paper suggests using portfolio management methods in policy planning models as a practical tool for determining optimal policy under model parameter uncertainty. We suggest that in addition to calculating the standard policy return estimates, policy options should also be analyzed from the...

This paper studies the problem of pricing and trading of defaultable bonds among investors with heterogeneous risk preferences and beliefs. Based on the utility indifference pricing methodology, we first construct the risk-averse bid-ask spread, which naturally widens as risk aversion or trading...

We study the impact of liquidity in optimal portfolio choice under leveraging to improve risk-adjusted and absolute returns. We consider a quasi-elastic market with continuous trading where temporary liquidity costs are sufficiently large relative to permanent impact. We show analytically that...

We propose an equilibrium framework within which to price financial securities written on non- tradable underlyings such as temperature indices. We analyze a financial market with a finite set of agents whose preferences are described by a convex dynamic risk measure generated by the solution of...

The aim of this paper is to investigate long-term portfolio management in a fully structural macro- financial framework. First, we estimate a Dynamic Stochastic General Equilibrium (DSGE) model that describes the dynamic of the US economy and financial markets. In addition to the typical...

The paper presents a computationally efficient method to solve overlapping gener- ations models with asset choice. The method is used to study an OLG economy with many cohorts, up to 3 different assets, stochastic volatility, short-sale constraints, and subject to rather large technology shocks....

Time-consistency and optimal diversification (minimum-variance) criteria are popular in the dynamic portfolio construction in practice. This paper is devoted to the exact analytic solution of the time-consistent mean-variance portfolio selection with assets that can be all risky in a...

This paper considers multiple market agents who have distinct distributional opinions about the state price density. We first determine the optimal trading positions of a utility maximizing market taker who trades Arrow-Debreu securities for prices set by the market maker. We use calculus of...

This paper provides a framework to endogenize rates of return for risk-free bonds and risky capital in an overlapping generation model. The rate of return on capital is endogenized by introducing idiosyncratic production shocks to avoid computation challenges associated with aggregate production...