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We introduce new forecast encompassing tests for the risk measure Expected Shortfall (ES). The ES currently receives much attention through its introduction into the Basel III Accords, which stipulate its use as the primary market risk…
High complexity models are notorious in machine learning for overfitting, a phenomenon in which models well represent data but fail to generalize an underlying data generating process. A typical procedure for circumventing overfitting…
In this paper we study the implications of contingent payments on the clearing wealth in a network model of financial contagion. We consider an extension of the Eisenberg-Noe financial contagion model in which the nominal interbank…
Microfinance, despite its significant potential for poverty reduction, is facing sustainability hardships due to high default rates. Although many methods in regular finance can estimate credit scores and default probabilities, these…
In this article, we propose a novel characterization of law-invariant and coherent risk measures, based on a generalized optimal transport problem in which the second marginal of the admissible plans is not fixed, but required to lie within…
We discuss risk measures representing the minimum amount of capital a financial institution needs to raise and invest in a pre-specified eligible asset to ensure it is adequately capitalized. Most of the literature has focused on…
This study develops and analyzes an optimization model of smart contract adoption under bounded risk, linking structural theory with simulation and real-world validation. We examine how adoption intensity alpha is structurally pinned at a…
Multiple hypothesis testing practices vary widely, without consensus on which are appropriate when. This paper provides an economic foundation for these practices designed to capture leading examples, such as regulatory approval on the…
Choice overload - in which larger choice sets are detrimental to a chooser's well-being - is potentially of great importance in the design of economic policy. Yet the current evidence on its prevalence is inconclusive. We argue that…
We consider the problem of governing systemic risk in an assets-liabilities dynamical model of banking system. In the model considered each bank is represented by its assets and its liabilities.The capital reserves of a bank are the…
In this paper, we consider a risk-averse decision problem for controlled-diffusion processes, with dynamic risk measures, in which multiple risk-averse agents choose their decisions in such a way to minimize their individual accumulated…
We study submodularity for law-invariant functionals, with particular attention to convex risk measures. Expected losses are modular, and certainty equivalents are submodular exactly when the loss function is convex. Law-invariant coherent…
In this paper, we study general monetary risk measures (without any convexity or weak convexity). A monetary (respectively, positively homogeneous) risk measure can be characterized as the lower envelope of a family of convex (respectively,…
We consider nonadaptive group testing with Bernoulli tests, where each item is placed in each test independently with some fixed probability. We give a tight threshold on the maximum number of tests required to find the defective set under…
In the literature on risk measures, cash subadditivity was proposed to replace cash additivity, motivated by the presence of stochastic or ambiguous interest rates and defaultable contingent claims. Cash subadditivity has been traditionally…
Governance theory has quietly relied on a rough cognitive comparability between governors and governed. The assumption is load-bearing, and this paper tries to show why by making it testable. The vehicle is a six-dimension evaluation…
Accepting a proposition means that our confidence in this proposition is strictly greater than the confidence in its negation. This paper investigates the subclass of uncertainty measures, expressing confidence, that capture the idea of…
This work introduces a novel framework for evaluating LLMs' capacity to balance instruction-following with critical reasoning when presented with multiple-choice questions containing no valid answers. Through systematic evaluation across…
Group testing is a well known search problem that consists in detecting the defective members of a set of objects O by performing tests on properly chosen subsets (pools) of the given set O. In classical group testing the goal is to find…
This paper investigates the use of risk measures and theories of choice for modeling risk-averse route choice and traffic network equilibrium with random travel times. We interpret the postulates of these theories in the context of routing,…