We propose an asset pricing model featuring both limited participation and heterogeneity, in which agents randomly participate in the bond and stock markets according to a probability that depends on their non-financial income. We develop an indirect inference method to estimate our model on...

We present a simple theory of business-cycle movements of option prices and volumes. This theory relies on time-varying heterogeneity between agents in their demand for insurance against aggregate risk. Formally, we build an infinite-horizon model where agents face an aggregate risk, but also...

We analyze the term structure of real interest rates in a general equilibrium model with incomplete markets and borrowing constraints. Agents are subject to both aggregate and idiosyncratic income shocks, which latter may force them into early portfolio liquidation in a bad aggregate state. We...

We introduce the Monte-Carlo based heuristic with first-come-first-served approximation for future optimal strategy (MC-FCFS) in order to maximize profit in a network revenue management problem. Like the randomized linear programming (RLP) model, one purpose of the MC-FCFS heuristic is to have...

Filtering methods are powerful tools to estimate the hidden state of a state-space model from observations available in real time. However, they are known to be highly sensitive to the presence of small misspecifications of the underlying model and to outliers in the observation process. In this...