The method of endogenous gridpoints (ENDG) significantly speeds up the solution to dynamic stochastic optimization problems with continuous state and control variables by avoiding repeated computations of expected outcomes while searching for optimal policy functions. I provide an interpolation technique for non-rectilinear grids that allows ENDG to be used in n-dimensional problems in an intui...

The present paper accomplishes a major step towards a reconciliation of two conflicting approaches in mathematical finance: on the one hand, the mainstream approach based on the notion of no arbitrage (Black, Merton & Scholes); and on the other hand, the consideration of non-semimartingale price processes, the archetype of which being fractional Brownian motion (Mandelbrot). Imposing (arbitrari...

The authors extend the well-known Hansen and Jagannathan (HJ) volatility bound. HJ characterize the lower bound on the volatility of any admissible stochastic discount factor (SDF) that prices correctly a set of primitive asset returns. The authors characterize this lower bound for any admissible SDF that prices correctly both primitive asset returns and quadratic payoffs of the same primitive ...

This paper shows that, by adding a limited liability constraint to a standard relational contract model with imperfect public monitoring, one can obtain de…nitive empirical implications of optimal relational contracts that shed light on important features of employment relationship. First and foremost, the employment dynamics has an “up-or-out”property. An employee begins the employment relatio...

This paper shows that the efficiency of relational contracting can be increased by reducing the public information through a novel intertemporalgarbling process of signals. A distinctive and essential feature of our intertemporalgarbling process is that past outputs have enduring effects on future signals. This process reduces the principal’s maximal reneging temptation by linking together the ...

The article gives new answers to the two following questions: One, what can be a potential source of the twin-peaks of economic growth? Two, why were some of the countries that were believed to belong to the group of low steady state countries (like Taiwan, South Korea, Japan, etc.) able to reach a convergence path which led them to a high steady state? We endogenize the time preference rate vi...

We show that crude oil production from existing wells in Texas does not respond to current or expected future oil prices, contradicting a basic prediction of Hotelling’s (1931) canonical model of exhaustible resource extraction. In contrast, the drilling of new wells exhibits a strong price response, as does the rental rate on drilling rigs. To explain these observations, we reformulate Hotelli...

abstract exchange rate volatility is one of the effective and ambiguous factors in agricultural products export. regarding the importance of agricultural trade, to avoid single-product economy, the main aim of this study is to investigate the impact of exchange rate volatility on the pistachio export of iran during 1338-1386. for this purpose, exchange rate volatility index was estimated using ...

This paper analyses optimal monetary policy in a small open economy allowing for financial dollarization (FD). More importantly, we endogenise FD, making it dependent on the expected monetary policy. Contrary to the standard small open economy model, where central banks should control domestic (producer) prices and adopt a pure floating exchange rate regime, we find that some exchange rate cont...

objective of this study is to determine whether there are significant changes in maximum temperature trends between the current (1981-2010) and future (2011-2099) periods. to this end, statistical downscaling is used to project future changes in the maximum temperatures according to a2 and b2 scenarios of hadcm3 in the 7 selected stations of iran. the possibilities of an accelerating trend are ...