Abel Cadenillas

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We consider first-best risk-sharing problems in which " the agent " can control both the drift (effort choice) and the volatility of the underlying process (project selection). In a model of delegated portfolio management, it is optimal to compensate the manager with an option-type payoff, where the functional form of the option is obtained as a solution to(More)
Motivated by empirical observations, we assume that the inventory level of a company follows a mean reverting process. The objective of the management is to keep this inventory level as close as possible to a given target; there is a running cost associated with the difference between the actual inventory level and the target. If inventory deviates too much(More)
We assume that consumer demand for an item follows a Brownian motion with a drift that is modulated by a continuous-time Markov chain that represents the regime of the economy. The economy may be in either one of two regimes. The economy remains in one regime for a random amount of time that is exponentially distributed with rate λ1, and then moves to the(More)
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