We provide a representation for the nonmyopic optimal portfolio of an agentconsuming only at the terminal horizon when the single state variable follows ageneral diusion process and the market consists of one risky asset and a risk-freeasset. The key term of our representation is a new object...

We study the existence of dynamic equilibria with endogenously complete markets incontinuous-time, heterogenous agents economies driven by diusion processes. Ourmain results show that under appropriate conditions on the transition density ofthe state variables, market completeness can be deduced...

Control problems with Recursive Multiple-Priors Utility (RMPU) are highly non-linear so that RMPU asset prices have been studied in very simple exchange economies only. We identify a continuous-time exchange equilibrium with Locally-Constrained-Entropy RMPU (LCE-RMPU) that is tractable even in...

This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investor’s expected life-time utility, and analyze his hedging demands for intertemporal changes...

Theories of investment suggest that the option value of waiting to invest is significant in many branches of economics, where investment is irreversible. The existing literature has generally failed to account for the general equilibrium feedback effects of lumpy investments on optimal...

We derive representations for the stock price drift and volatility in theequilibrium of agents with arbitrary, heterogeneous utility functionsand with the aggregate dividend following an arbitrary Markov diffusion.We introduce a new, intrinsic characteristic of the aggregate dividendprocess that...

We consider a simple continuous-time economy, populated by a largenumber of agents, more risk averse than the log agent, with heterogeneousrisk aversion densely covering an interval. Even though thedividend is a geometric Brownian motion, the equilibrium investmentopportunity set is stochastic...

In all the existing literature on survival in heterogeneous economies,the rate at which an agent vanishes in the long run relative to anotheragent can be characterized by the difference of the so-called survivalindices, where each survival index only depends on the preferencesof the...

We perform a detailed asymptotic analysis of the equilibrium behavior of the assetprices, wealth size and portfolio weights in complete markets equilibria, with long-livedfunds. In equilibrium, the fund with the (closest to) log preference will dominate theother funds in size, in the long-run,...

This paper analyses the default option typical to American mortgages. Households borrow to buy durable housing, but future house prices are uncertain, and households find it dvantageous to default on their debt if house prices fall sufficiently. A key assumption of the model is that households...