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In the theory of dynamic programming, an optimal policy is a policy whose lifetime value dominates that of all other policies from every possible initial condition in the state space. This raises a natural question: when does optimality…
A monopoly platform sells either a risky product (with unknown utility) or a safe product (with known utility) to agents who sequentially arrive and learn the utility of the risky product by the reporting of previous agents. It is costly…
This paper explores stochastic control models in the context of decarbonization within the energy market. We study three progressively complex scenarios: (1) a single firm operating with two technologies-one polluting and one clean,(2)two…
Default risk significantly affects the corporate policies of a firm. We develop a model in which a limited liability entity subject to Poisson default shock jointly sets its dividend policy and capital structure to maximize the expected…
Markov decision processes (MDPs) are used to model a wide variety of applications ranging from game playing over robotics to finance. Their optimal policy typically maximizes the expected sum of rewards given at each step of the decision…
We consider in this paper the optimal dividend problem for an insurance company whose uncontrolled reserve process evolves as a classical Cram\'{e}r--Lundberg process. The firm has the option of investing part of the surplus in a…
This paper proposes and studies an optimal dividend problem in which a two-state regime-switching environment affects the dynamics of the company's cash surplus and, as a novel feature, also the bankruptcy level. The aim is to maximize the…
We study the problem of a planner who resolves risk-return trade-offs - like financial investment decisions - on behalf of a collective of agents with heterogeneous risk preferences. The planner's objective is a two-stage utility functional…
Dynamic max-min fair allocation (DMMF) is a simple and popular mechanism for the repeated allocation of a shared resource among competing agents: in each round, each agent can choose to request or not for the resource, which is then…
A principal uses payments conditioned on stochastic outcomes of a team project to elicit costly effort from the team members. We develop a multi-agent generalization of a classic first-order approach to contract optimization by leveraging…
We consider the issue of a market maker acting at the same time in the lit and dark pools of an exchange. The exchange wishes to establish a suitable make-take fees policy to attract transactions on its venues. We first solve the stochastic…
A decision maker is choosing between an active action (e.g., purchase a house, invest certain stock) and a passive action. The payoff of the active action depends on the buyer's private type and also an unknown state of nature. An…
In dynamic programming and reinforcement learning, the policy for the sequential decision making of an agent in a stochastic environment is usually determined by expressing the goal as a scalar reward function and seeking a policy that…
In this technical note, we establish an upper-bound on the threshold on the discount factor starting from which all discounted-optimal deterministic policies are gain-optimal, that we prove to be tight on an example. To address…
We provide easily verifiable conditions for the well-posedness of the optimal investment problem for a behavioral investor in an incomplete discrete-time multiperiod financial market model, for the first time in the literature. Under two…
A decision maker typically (i) incorporates training data to learn about the relative effectiveness of treatments, and (ii) chooses an implementation mechanism that implies an ``optimal'' predicted outcome distribution according to some…
This paper investigates dividend optimization of an insurance corporation under a more realistic model which takes into consideration refinancing or capital injections. The model follows the compound Poisson framework with credit interest…
This paper considers an insurer with two collaborating business lines, and the risk exposure of each line follows a diffusion risk model. The manager of the insurer makes three decisions for each line: (i) dividend payout, (ii)…
This paper considers optimal control problem of a large insurance company under a fixed insolvency probability. The company controls proportional reinsurance rate, dividend pay-outs and investing process to maximize the expected present…
I study the optimal regulation of a financial sector where individual banks face self-enforcing constraints countering their default incentives. The constrained-efficient social planner can improve over the unregulated equilibrium in two…