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In this article, we develop a model for the evolution of real estate prices. A wide range of inputs, including stochastic interest rates and changing demands for the asset, are considered. Maximizing their expected utility, home owners make…
Prepayment risk embedded in fixed-rate mortgages forms a significant fraction of a financial institution's exposure. The embedded prepayment option bears the same interest rate risk as an exotic interest rate swap with a suitable stochastic…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…
Strategies aimed at reducing the negative effects of long-term uncertainty and risk are common in biology, game theory, and finance, even if they entail a cost in terms of mean benefit. Here, we focus on the single mutant's invasion of a…
Homelessness in American cities is becoming an ever more prominent issue, but its causes remain contested, ranging from mental health and substance abuse to housing affordability and local labor markets. To shed light on this issue, I…
We analyze how equilibrium housing prices are determined in the process of economic development within an overlapping generations model with perfect housing and rental markets. We characterize the rent growth rate in all equilibria. The…
The determination of acceptability prices of contingent claims requires the choice of a stochastic model for the underlying asset price dynamics. Given this model, optimal bid and ask prices can be found by stochastic optimization. However,…
This study examines how congestion pricing shapes housing market outcomes and spatial equity in New York City. Using high-frequency sales and rental data and a combination of propensity score matching difference-in-differences, geographic…
Economists often estimate economic models on data and use the point estimates as a stand-in for the truth when studying the model's implications for optimal decision-making. This practice ignores model ambiguity, exposes the decision…
This paper studies a risk-sensitive decision-making problem under uncertainty. It considers a decision-making process that unfolds over a fixed number of stages, in which a decision-maker chooses among multiple alternatives, some of which…
We study the effect of localized housing price hikes on renters' mobility, consumption, and credit outcomes. Consistent with a spatial equilibrium model, we find that the consumption responses vary greatly for movers and stayers. While…
We consider a simple stochastic model of a urban rental housing market, in which the interaction of tenants and landlords induces rent fluctuations. We simulate the model numerically and measure the equilibrium rent distribution, which is…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
In this paper, we propose the uncertain volatility models with stochastic bounds. Like the regular uncertain volatility models, we know only that the true model lies in a family of progressively measurable and bounded processes, but instead…
We determine forest lease value and optimal harvesting strategies under model parameter uncertainty within stochastic bio-economic models that account for catastrophe risk. Catastrophic events are modeled as a Poisson point process, with a…
Residential segregation is analyzed via the Schelling model, in which two types of agents attempt to optimize their situation according to certain preferences and tolerance levels. Several variants of this work are focused on urban or…
A problem of optimal debt management is modeled as a noncooperative game between a borrower and a pool of lenders, in infinite time horizon with exponential discount. The yearly income of the borrower is governed by a stochastic process.…
We model stochastic choice as environment-dependent switching among a small library of deterministic decision rules. A Random Rule Model generates menu-level choice probabilities via named, interpretable rules weighted by observable menu…
Quantifying uncertainties in collective human behavior and decision making is crucial for ensuring public health and safety, enabling effective disaster response, informing the design of transportation and communication networks, and…
This study examines how housing sector volatilities affect real estate investment trust (REIT) equity return in the United States. I argue that unexpected changes in housing variables can be a source of aggregate housing risk, and the first…