A Simple Factoring Pricing Model

A Simple Model of Search Engine Pricing*

We present a simple model of how a monopolistic search engine optimally determines the average relevance of firms in its search pool. In our model, there is a continuum of consumers, who use the search engine’s pool, and there is a continuum of firms, whose entry to the pool is restricted by a price-per-click set by the search engine. We show that a monopolistic search engine may have an incent...

A Simple Funds Transfer Pricing Model for a Commercial Bank

A Simple Model for Option Pricing with Jumping Stochastic Volatility

This paper proposes a simple modification of the Black–Scholes model by assuming that the volatility of the stock may jump at a random time τ from a value σa to a value σb. It shows that, if the market price of volatility risk is unknown, but constant, all contingent claims can be valued from the actual price C0, of some arbitrarily chosen “basis” option. Closed form solutions for the prices of...

Multiple Equilibria in a Simple Asset Pricing Model with Foresight∗

Motivated by recent Federal Reserve’s unconventional monetary policies, this paper explicitly models the central bank’s large-scale asset purchases(LSAPs) along with its foresight brought by forward guidance by characterizing the central bank’s actions as a liquidity trader who sends signals to the public q period in advance. Assuming negative-exponential utility with Gaussian uncertainty(CARA-...

Multiple Equilibria in a Simple Asset Pricing Model∗

Multiple stationary equilibria are often encountered in standard asset pricing models when one assumes negative-exponential utility with Gaussian uncertainty. This paper demonstrates that there are exactly two stationary equilibria, which are due solely to the presence of nonlinearities.