This paper analyzes dynamic equilibrium risk sharing contracts between profit-maximizing intermediaries and a large pool of ex-ante identical agents that face idiosyncratic income uncertainty that makes them heterogeneous ex-post. In any given period, after having observed her income, the agent...

This paper studies the link between group-specic consumption growth and volatility within a framework of heterogeneous agents, under the assumption of a consumption externality. Household preferences are related to the volatility through asset holding decisions: volatility decreases with groups'...

This paper studies the role of uncertainty in the corporate cash hoarding puzzle. The baseline model is a stochastic neoclassical growth model featuring idiosyncratic and uninsurable productivity shocks and a cash-in-advance constraint on new in- vestments on the individual firm level....

This paper develops a simple New Keynesian model incorporating a small time-varying probability that the economy is struck by a disaster in the future. The model's main prediction is that a small increase in the disaster probability causes a recession in the economy, specically due to limited...

This paper poses the following question: Is it possible to improve welfare by increasing taxes and throwing away the revenues? This paper demonstrates that the answer to this question is “yes.” We show that there may be welfare gains from taxing capital income even when the additional...

This paper explores the optimal risk sharing arrangement between generations in an overlapping generations model with endogenous growth. We allow for nonseparable preferences, paying particular attention to the risk aversion of the old as well as overall ``life-cycle´´ risk aversion. We...

This paper tests how subjects behave in an intertemporal consumption/saving experiment when borrowing is allowed and whether subjects treat debt differently than savings. Two treatments create environments where either saving or borrowing is required for optimal consumption. Since both...

I construct risk-corrected approximations of the policy functions of DSGEmodels around the stochastic steady state and ergodic mean that are linear in the state variables. The resulting approximations are uniformly more accurate than standard linear approximations and capture the dynamics of...

The utility maximisation problem is considered for investors with anticipative additional information. We distinguish between models with conditional measures and models with enlarged filtrations. The dual functions of the maximal expected utility are determined with the help of f-divergences....

The trade-off theory on capital structure is tested by modelling the capital structure target as the solution to a maximization problem. This solution maps asset volatility and loss given default to optimal leverage. By applying nonlinear structural equation modelling, these unobservable...