Department of Economics


Lucien P. Foldes


Positions: Emeritus Professor of Economics. Member of Financial Markets Group and Systemic Risk Centre.

Research Interests: Applications of probability in Capital Theory and Finance, in particular, stochastic models of optimal saving, growth and portfolio selection. Martingale and differential equation methods related to these problems. Investment appraisal and micro-economic decision problems generally.

Languages: German, French.

Contact Details

  • Telephone: 020 7849 4962
  • Messages: 020 7955 7002
  • Email: l.foldes@lse.ac.uk
  • Room number: R428

Membership of Societies: Royal Economic Society; American Economic Association; American Finance Association; London Mathematical Society; American Mathematical Society; Royal Statistical Society; Society for Industrial and Applied Mathematics


Publications


Selected Articles

  • 'Income Redistribution in Money and in Kind', Economica, NS XXXIV-XXXV, February and May 1967, May 1968. [Three papers: details.]
  • 'Expected Utility and Continuity', Review of Economic Studies, XXXIX(4), October 1972, pp. 407-421. (Link to published text.)
  • 'Optimal Saving and Risk in Continuous Time', Review of Economic Studies, XLV(1), February 1978, pp. 39-65. (Link to published text.)
    Reprinted in Continuous Time Finance, S. Schaefer (ed.), Edward Elgar Publishing 2001.
  • 'Martingale Conditions for Optimal Saving: Discrete Time', Journal of Mathematical Economics, 5(1), March 1978, pp. 83-96. An earlier version was circulated in September 1976 as Papers in Capital and Risk No. 2 [Corrected text of PCR No. 2 as pdf].
  • 'Quarterly Returns to UK Equities 1919-1970', with P. M. Watson, Economica, 49(2), May 1982.
    Further papers related to this article, all joint with Pauline M. Watson, were circulated in the series Papers on Capital and Risk (PCR), as follows:
    (i) A more detailed paper with the same title, PCR No. 6, 1978 [pdf].
    (ii) 'Time Series Analysis of UK and US Equity Portfolios 1926-1970', PCR No. 8, 1982 [pdf].
    (iii) 'Quarterly Returns to Treasury Bills: UK and US, 1926-75', PCR No. 7, 1981 [pdf].
    The database which we compiled for these studies is available in machine readable form for general use, together with a programme for calculating returns, taking into account dividends, bonus and rights issues, taxation, inflation, etc.
  • 'Conditions for Optimality in the Infinite-Horizon Portfolio-cum-Saving Problem with Semimartingale Investments', Stochastics and Stochastics Reports, Vol. 29, 1990, pp. 133- 170. An earlier version was circulated in April 1989 as LSE Financial Markets Group D.P. No. 53 [pdf].
  • 'Certainty Equivalence in the Continuous-Time Portfolio-cum-Saving Model' in Applied Stochastic Analysis,
    M. H. A. Davis and R. J. Elliott (eds.), 1991, pp. 343-387.
    An earlier version was circulated in August 1990 as LSE Financial Markets Group D.P. No. 95. [Text of D.P. 95 as pdf.]
  • 'Optimal Sure Portfolio Plans', Mathematical Finance, Vol. 1, April 1991, pp. 15-55.
    An earlier version was circulated in November 1990 as LSE Financial Markets Group D.P. No. 106. [Corrected text of D.P. 106 as pdf.]
  • 'Existence and Uniqueness of an Optimum in the Infinite-Horizon Portfolio-cum-Saving Model with Semimartingale Investments', Stochastics and Stochastics Reports, Vol. 41, December 1992, pp. 241-267. An earlier version was circulated in January 1991 as LSE Financial Markets Group D.P. No. 109. [Corrected text of D.P. 109 as pdf.]
  • 'Valuation and Martingale Properties of Shadow Prices - An Exposition', Journal of Economic Dynamics and Control, Vol. 24, 2000, pp. 1641-1702. An earlier version was circulated as LSE Financial Markets Group D.P. No. 342. [Abstract; text of D.P. 342 as pdf].
  • The Optimal Consumption Function in a Brownian Model of Accumulation
    Part A: 'The Consumption Function as Solution of a Boundary Value Problem', Journal of Economic Dynamics and Control, Vol.25(2001), pp.1951-1971. An earlier version was circulated as STICERD TE/96/297 [Abstract; text of TE/96/297 as pdf].

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Working Papers

  • The Optimal Consumption Function in a Brownian Model of Accumulation
    Part B: 'Existence of Solutions of Boundary Value Problems', STICERD TE/96/310 [Abstract] [full text as pdf]
  • 'Continuous-Time Optimal Stochastic Growth: Local Martingales, Transversality and Existence'
    LSE Financial Markets Research Centre, D.P. No 479 (2004), [full text as pdf]

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Work In Progress

  • The Optimal Consumption Function in a Brownian Model of Accumulation
    Part C: 'Stable Manifolds and Perturbations'; (draft under revision).
  • Optimal Accumulation of Capital in a Stochastic Model (provisional title)
    A monograph to be published by Cambridge University Press. Several draft chapters completed (see last four preceding items above). Further parts in progress.
  • Further work on boundary value problems arising in the theory of optimal accumulation.
  • Various drafts/lectures notes on stochastic methods in finance and capital/growth theory.

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Selected Conferences

  • 23-29 August 1992 Oberwolfach Conference on Mathematical Finance.
    Lecture on Semimartingale Calculus in Portfolio Theory [lecture notes as pdf].
  • Jan-June 95 Participant (part-time) in Financial Mathematics Programme at Isaac Newton Institute for Mathematical Sciences, Cambridge.
    Lectures on Semimartingales with applications in finance.
  • 25-29 April 2005 Participant in Programme on Developments in Quantitative Finance at Isaac Newton Institute for Mathematical Sciences, Cambridge.
    Lecture on Boundary Value Problems in Optimal Investment.

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Publications before 1978

  • The Delegation of Authority to Spend, Economica, August 1955. (Link to published text.)
  • Iron and Steel Prices, Economica, 1956. (Link to published text.)
  • The Control of Nationalised Industries, Public Law, 1957. [Full text as pdf.]
  • Military Budgeting and Financial Control in Three Countries, Public Administration Review, 1957. (Link to published text.)
  • Uncertainty, Probability and Potential Surprise, Economica, NS XXV(3), August 1958. (Link to published text.)
  • Imperfect Capital Markets and the Theory of Investment, Review of Economic Studies, XXVIII(3), 1961. (Link to published text.)
  • 55 Iron and Steel Companies, 1948-59,, with S. S. Wilson, London and Cambridge Bulletin, March 1961.[Full text as pdf.]
  • Domestic Air Transport Policy (two papers), Economica, NS XXVIII(2&3), May (Link) & August 1961. (Link to published text.)
  • A Determinate Model of Bilateral Monopoly, Economica, NS XXXI(2), May 1964. (Link to published text.)
  • Discussion of Professor Borch's Paper The Theory of Risk, Journal of the Royal Statistical Society Series B vol. 29, 1967, No. 3, p. 460.[Full text as pdf.]
  • Income Redistribution in Money and in Kind, Economica, NS XXXIV(1), February 1967. (Link to published text.)
  • A Note on Redistribution, Economica, XXXIV(2), May 1967. (Link to published text.)
  • Redistribution: A Reply, Economica, XXXV(2), May 1968. (Link to published text.)
  • A Note on Individualistic Explanations, in Problems in the Philosophy of Science, I. Lakatos and A. Musgrave (eds.), North-Holland, 1968.[Full text as pdf.]
  • Inflation and Financial Accounts: The Treatment of Loan Capital, The Accountant, 22 July 1971.[Full text as pdf.]
  • Some Comments on the Theory of Monopoly, in Essays in Honour of Lord Robbins, M. Peston and B. Corry (eds.), Weidenfeld & Nicholson, 1972. [Full text as pdf.]
  • Expected Utility and Continuity, Review of Economic Studies, XXXIX(4), October 1972, pp. 407-421. (Link to published text.)
  • Estimates of Marginal Tax Rates for Dividends and Bond Interest in the United Kingdom 1919-1970, with A. J. H. Orhnial, Economica, 1975. (Link to published text.) A more detailed report with the same title was circulated as Paper No. 4, 1976, in the series Papers on Capital and Risk [pdf].
  • Tax Uncertainty in Project Evaluation: A Case Study, with A. J. H. Orhnial, Accounting and Business Research, 1975. [Full text as pdf.]
  • A Note on the Arrow-Lind Theorem, with R. Rees, American Economic Review, March 1977.( Link to published text.)

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Selected Unpublished Work

  • 1951 A Survey of Monopoly Legislation, with Mrs J. M. Hood, prepared for Economist Intelligence Unit.
  • 1952 The Rationale of Cost. Thesis for M.Sc. Econ.
  • 1959 Notes on Decision Theory. Circulated but not published.
  • 1967 Distributive Criteria in the Theory of Economic Policy. Several draft chapters.
  • 1972 The Effect of Connection Charges on the Number of Connections and on the Prices and Rents of Houses: (comments on economic issues raised by the Monopolies Commission Report Connection Charges for Electricity and Gas, Cmnd. 5036, 1972). [pdf].
  • 1982 Price Stabilisation and the Zinc Producer Group.
  • 1980s Optimal Accumulation of Capital: A Continuous-Time Martingale Theory
    Part I: Optimal Saving with Risk
    Part II: The Portfolio-cum-Saving Model.
    A monograph accepted for publication but put aside. Some of the material has appeared in articles and some has recently been updated and used for current work.

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Surveys of Research and Teaching

Foldes, Lucien Paul --- Draft entries (written by me) for Who's Who in Economics, 2nd edition (1985) and 3rd edition (1999), both published by Edward Elgar. The entry in the 2nd edition summarises my work (including teaching) mainly up to 1982, while the entry in the 3rd edition concentrates on my work in mathematical economics/finance, mainly 1972-96.

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