Following the lead of Merton (1974), recent research has focused on the relationship of credit risk to firm value. Although this has usually been done for a single firm, the growth of structured finance, which necessarily involves the correlation between included securities, has spurred interest...

Using standard preferences for asset pricing has not been very successful to match asset price characteristics such as the risk-free interest rate, equity premium and the Sharpe ratio to time series data. Behavioral finance has recently proposed more realistic preferences such as preferences...

Economic research of the last decade linking macroeconomic fundamentals to asset prices has revealed evidence that standard intertemporal asset pricing theory is not successful in explaining (unconditional) first moments of asset market characteristics such as the risk free intrest rate, stock...

In this paper we demonstrate that a standard loss function of a central bank may generate multiple equilibria which can contribute to hysteresis effects on the labor market. Multiple equilibria are feasible if the objective function of the central bank is non-quadratic. Such preferences may...

The recent literature on monetary policy has questioned the use of linear Phillips curves and the assumption of a constant NAIRU. In this paper we explore monetary policy considering different shapes of the Phillips curve and an endogenous NAIRU. The NAIRU is, as recent papers suggest, made...

A wealth of literature, reviewed in the first section of this paper, is concerned with the occurence of multiple equilibria in economic optimization models and with the resulting history dependence of optimal solutions. Typically, the existence of multiple equilibria is associated with market...