Related papers: Social Discounting and the Long Rate of Interest

This paper studies the dividend and capital injection problem under a diffusion risk model with general discount functions. A proportional cost is imposed when injecting capitals. For exponential discounting as time-consistent benchmark, we…

The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…

Cryptocurrency lending pools are services that allow lenders to pool together assets in one cryptocurrency and loan it out to borrowers who provide collateral worth more (than the loan) in a separate cryptocurrency. Borrowers can repay…

Adopting a probabilistic approach we determine the optimal dividend payout policy of a firm whose surplus process follows a controlled arithmetic Brownian motion and whose cash-flows are discounted at a stochastic dynamic rate. Dividends…

Certain renewal theorems are extended to the case that the rate of the renewal process goes to 0 and, more generally, to the case that the drift of the random walk goes to infinity. These extensions are motivated by and applied to the…

In this paper we study perpetual American call and put options in an exponential L\'evy model. We consider a negative effective discount rate which arises in a number of financial applications including stock loans and real options, where…

The hypothesis that committed revolving credit lines with fixed spreads can provide firms with interest rate insurance is a standard feature of models on these credit facilities' interest rate structure. Nevertheless, this hypothesis has…

We study the social efficiency of bilateral trade between a seller and a buyer. In the classical Bayesian setting, the celebrated Myerson-Satterthwaite impossibility theorem states that no Bayesian incentive-compatible, individually…

The purpose of this paper relies on the study of long term yield curves modeling. Inspired by the economic litterature, it provides a financial interpretation of the Ramsey rule that links discount rate and marginal utility of aggregate…

When decision makers evaluate a sequence of rewards, they may pay more attention to larger rewards and, given attention is limited, less attention to smaller rewards. They may also become less attentive to each reward when attention is…

The paper tests the validity of the critique of the fiscal theory of the price level. A stochastic general equilibrium model with continuous time is constructed. An active fiscal policy and a passive monetary policy have been set. Monetary…

In this paper we explore the relationship between the existence of eternal inflation and the initial conditions leading to inflation. We demonstrate that past and future completion of inflation is related, in that past-incomplete inflation…

We propose a model for the credit markets in which the random default times of bonds are assumed to be given as functions of one or more independent "market factors". Market participants are assumed to have partial information about each of…

We propose a new model for the joint evolution of the European inflation rate, the European Central Bank official interest rate and the short-term interest rate, in a stochastic, continuous time setting. We derive the valuation equation for…

The two-body potential of systems with long-range interactions decays at large distances as $V(r)\sim 1/r^\alpha$, with $\alpha\leq d$, where $d$ is the space dimension. Examples are: gravitational systems, two-dimensional hydrodynamics,…

Explicitly taking into account the risk incurred when borrowing at a shorter tenor versus lending at a longer tenor ("roll-over risk"), we construct a stochastic model framework for the term structure of interest rates in which a frequency…

Once upon a time there was a classical financial world in which all the Libors were equal. Standard textbooks taught that simple relations held, such that, for example, a 6 months Libor Deposit was replicable with a 3 months Libor Deposits…

We show that different rates should be used for borrowing and discount rates, and that the risk-free rate should be used for discounting when assessing and comparing the cost of energy accross diffferent producers and technologies, on the…

The Lindy effect is a statistical tendency for things with longer pasts behind them to have longer futures ahead. It has been experimentally confirmed to apply to some categories, but not others, raising questions about when it is…

Solomon and Golo [1] have recently proposed an autocatalytic (self-reinforcing) feedback model which couples a macroscopic system parameter (the interest rate), a microscopic parameter that measures the distribution of the states of the…