Related papers: Moral Hazard in Dynamic Risk Management
We consider both discrete and continuous "uncertain horizon" deterministic control processes, for which the termination time is a random variable. We examine the dynamic programming equations for the value function of such processes,…
We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their…
Inspired by recent ideas on how the analysis of complex financial risks can benefit from analogies with independent research areas, we propose an unorthodox framework for mapping microfinance credit risk---a major obstacle to the…
In this paper, we study a stochastic optimal control problem with stochastic volatility. We prove the sufficient and necessary maximum principle for the proposed problem. Then we apply the results to solve an investment, consumption and…
We study a natural combinatorial single-principal multi-agent contract design problem, in which a principal motivates a team of agents to exert effort toward a given task. At the heart of our model is a reward function, which maps the agent…
We study a class of dynamically consistent risk measures that robustify a time-homogeneous Markovian reference model by allowing for distributional uncertainty in its transition laws. We start from one-step convex risk evaluations in which…
This paper characterises optimal incentive schemes for ESG disclosure in a continuous-time principal-agent setting. We model a risk-averse principal (e.g., a platform or standard-setter) contracting with a team of heterogeneous agents whose…
We study linear contracts for combinatorial problems in multi-agent settings. In this problem, a principal designs a linear contract with several agents, each of whom can decide to take a costly action or not. The principal observes only…
We consider a robust consumption-investment problem under CRRA and CARA utilities. The time-varying confidence sets are specified by $\Theta$, a correspondence from $[0,T]$ to the space of L\'{e}vy triplets, and describe priori information…
Principal-agent problems arise when one party acts on behalf of another, leading to conflicts of interest. The economic literature has extensively studied principal-agent problems, and recent work has extended this to more complex scenarios…
This paper studies a {\it reversible} investment problem where a social planner aims to control its capacity production in order to fit optimally the random demand of a good. Our model allows for general diffusion dynamics on the demand as…
The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a martingale optimal transport problem is proved. The financial market is modeled through a risky asset whose price is only…
We study the hidden-action principal-agent problem in an online setting. In each round, the principal posts a contract that specifies the payment to the agent based on each outcome. The agent then makes a strategic choice of action that…
We investigate the existence of an optimal policy to monitor a mean field systems of agents managing a risky project under moral hazard with accidents modeled by L\'evy processes magnified by the law of the project. We provide a general…
We consider continuous-time stochastic optimal control problems featuring Conditional Value-at-Risk (CVaR) in the objective. The major difficulty in these problems arises from time-inconsistency, which prevents us from directly using…
While the investors' responses to price changes and their price forecasts are well accepted major factors contributing to large price fluctuations in financial markets, our study shows that investors' heterogeneous and dynamic risk aversion…
We study the problem of maximizing a spectral risk measure of a given output function which depends on several underlying variables, whose individual distributions are known but whose joint distribution is not. We establish and exploit an…
We use one-step conditional risk mappings to formulate a risk averse version of a total cost problem on a controlled Markov process in discrete time infinite horizon. The nonnegative one step costs are assumed to be lower semi-continuous…
We investigate an optimal reinsurance problem for an insurance company facing a constant fixed cost when the reinsurance contract is signed. The insurer needs to optimally choose both the starting time of the reinsurance contract and the…
This paper studies a dynamic screening model in which a principal hires an agent with limited liability. The agent's private cost of working is an i.i.d. draw from a continuous distribution. His working status is publicly observable. The…