Related papers: Fiscal stimulus as an optimal control problem
A planner allocates discrete transfers of size $D_g$ to $N$ heterogeneous groups labeled $g$ and has CES preferences over the resulting outcomes, $H_g(D_g)$. We derive a closed-form solution for optimally allocating a fixed budget subject…
In our model, private actors with interbank cash flows similar to, but nore general than (Carmona, Fouque, Sun, 2013) borrow from the outside economy at a certain interest rate, controlled by the central bank, and invest in risky assets.…
Healthy nutrition promotions and regulations have long been regarded as a tool for increasing social welfare. One of the avenues taken in the past decade is sugar consumption regulation by introducing a sugar tax. Such a tax increases the…
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.…
This paper studies a life-time consumption-investment problem under the Black-Scholes framework, where the consumption rate is subject to a lower bound constraint that linearly depends on her wealth. It is a stochastic control problem with…
We consider the problem of optimal consumption from labor income and investment in a general incomplete semimartingale market. The economic agent cannot borrow against future income, so the total wealth is required to be positive at (all or…
This paper studies stochastic control problems motivated by optimal consumption with wealth benchmark tracking. The benchmark process is modeled by a combination of a geometric Brownian motion and a running maximum process, indicating its…
We discuss a class of debt management problems in a stochastic environment model. We propose a model for the debt-to-GDP (Gross Domestic Product) ratio where the government interventions via fiscal policies affect the public debt and the…
In this paper, we present a simple microeconomic model with linear continuous-time dynamics that describes a production-inventory system with debt repayment. This model is formulated in terms of optimal control and its exact solutions are…
Funding is a cost to trading desks that they see as an input. Current FVA-related literature reflects this by also taking funding costs as an input, usually constant, and always risk-neutral. However, this funding curve is the output from a…
The seriousness of the current crisis urgently demands new economic thinking that breaks the austerity vs. deficit spending circle in economic policy. The core tenet of the paper is that the most important problems that natural and social…
Motivated by the AIG bailout case in the financial crisis of 2007-2008, we consider an insurer who wants to maximize the expected utility of the terminal wealth by selecting optimal investment and risk control strategies. The insurer's risk…
We study a problem of utility maximization under model uncertainty with information including jumps. We prove first that the value process of the robust stochastic control problem is described by the solution of a quadratic-exponential…
As the COVID19 spreads across the world, prevention measures are becoming the essential weapons to combat the pandemic in the period of crisis. The lockdown measure is the most controversial one as it imposes an overwhelming impact on our…
This paper studies the robust optimal gain selection problem for financial trading systems, formulated within a \emph{double linear policy} framework, which allocates capital across long and short positions. The key objective is to…
A continuous-time consumption-investment model with constraint is considered for a small investor whose decisions are the consumption rate and the allocation of wealth to a risk-free and a risky asset with logarithmic Brownian motion…
Any firm whose business strategy has an exposure constraint that limits its potential gain naturally considers expansion, as this can increase its exposure. We model business expansion as an enlargement of the opportunity set for business…
We consider an insurance company which faces financial risk in the form of insurance claims and market-dependent surplus fluctuations. The company aims to simultaneously control its terminal wealth (e.g. at the end of an accounting period)…
In this work, we provide a general mathematical formalism to study the optimal control of an epidemic, such as the COVID-19 pandemic, via incentives to lockdown and testing. In particular, we model the interplay between the government and…
This paper presents and discusses a mathematical model inspired by control theory to derive optimal public policies for minimizing costs associated with the reduction and control of criminal activity in a population. Specifically, we…