Papers
Demand Elasticity in Dynamic Asset Pricing
Uploaded: Aug 4, 2025
We show that the standard econometric approach relying on exogenous residual supply shocks systematically underestimates the slope of investors' asset demand curves in dynamic settings. We develop a multi-asset, multi-agent continuous-time model featuring long-lived investors and short-lived hedgers whose demand...
Probability Pricing
Uploaded: Aug 4, 2025
This paper extends traditional cash-flow pricing to analyze the willingness-to-pay for changes in probabilities, that is, probability pricing. We show that an agent’s willingness-to-pay for an arbitrary probability perturbation can be expressed as a cash-flow pricing formula for hypothetical cash...
Exploitation Payoffs and Incentives for Exploration
Uploaded: Aug 4, 2025
We study a dynamic moral hazard problem involving initial exploration followed by exploitation, merging experimentation with dynamic corporate finance. We show how the methods and conclusions of the experimentation literature change when considering the exploitation phase’s non-monotonic payoff structure that...
Moral hazard and the quest for linear contracts
Uploaded: Aug 4, 2025
30 min or 60 min fine.
This note derives three conditions under which affine or piecewise-linear contracts emerge in the classical principal-agent model of \cite{Holmstrom1979}. Specifically, augmenting fixed pay with equity or call
options is optimal when: (1) the agent...
The Color of Finance: Can Bank Capital Requirements Influence Transition to a Green Economy?∗
Uploaded: Aug 3, 2025
Using a general equilibrium model in which brown (polluting) and green (clean-energy) firms
compete and seek financing from banks, non-banks, or the capital market, we examine the effects
of higher capital requirements on brown bank loans designed to discourage such...
Environmental Disclosures in Global Supply Chains
Uploaded: Aug 2, 2025
Economies committed to environmental goals, such as mitigating global warming, face the challenge that pollution and emissions largely originate from activities in foreign countries. While governments may attempt to tax domestic firms’ sourcing of inputs from brown international firms, such...
