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In a Markovian model for a financial market, we characterize the best arbitrage with respect to the market portfolio that can be achieved using nonanticipative investment strategies, in terms of the smallest positive solution to a parabolic…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
We study the role and drivers of persistence in the extensive margin of bilateral trade. Motivated by a stylized heterogeneous firms model of international trade with market entry costs, we consider dynamic three-way fixed effects binary…
Learning problems commonly exhibit an interesting feedback mechanism wherein the population data reacts to competing decision makers' actions. This paper formulates a new game theoretic framework for this phenomenon, called "multi-player…
We use martingale and stochastic analysis techniques to study a continuous-time optimal stopping problem, in which the decision maker uses a dynamic convex risk measure to evaluate future rewards. We also find a saddle point for an…
Many economic interventions are designed as marginal changes in incentives. Yet in environments shaped by coordination, institutional persistence, and path dependence, such reforms often leave behavior largely unchanged. This paper studies…
We investigate the growth optimal strategy over a finite time horizon for a stock and bond portfolio in an analytically solvable multiplicative Markovian market model. We show that the optimal strategy consists in holding the amount of…
We combine forward investment performance processes and ambiguity averse portfolio selection. We introduce the notion of robust forward criteria which addresses the issues of ambiguity in model specification and in preferences and…
Leveraging tools from the study of linear fractional transformations and algebraic Riccati equations, a local characterization of consistent conjectural variations equilibrium is given for two player games on continuous action spaces with…
We establish explicit socially optimal rules for an irreversible investment deci- sion with time-to-build and uncertainty. Assuming a price sensitive demand function with a random intercept, we provide comparative statics and economic…
We study the problem of finding equilibrium strategies in multi-agent games with incomplete payoff information, where the payoff matrices are only known to the players up to some bounded uncertainty sets. In such games, an ex-post…
We construct Nash equilibria in feedback form for a class of two-person stochastic games of singular control with absorption, arising from a stylized model for corporate finance. More precisely, the paper focusses on a strategic dynamic…
In an incomplete continuous-time securities market with uncertainty generated by Brownian motions, we derive closed-form solutions for the equilibrium interest rate and market price of risk processes. The economy has a finite number of…
Rational pure bubble models feature multiple (and often a continuum of) equilibria, which makes model predictions and policy analyses non-robust. We show that when the interest rate in the fundamental equilibrium is below the economic…
In this paper, we investigate the robust optimal reinsurance,investment,and internal surplus distribution (i.e., consumption) problem for an insurer with Epstein-Zin recursive preferences in an incomplete market. It is assumed that the…
Considering uncertainties and disturbances is an important, yet challenging, step in successful decision making. The problem becomes more challenging in safety-constrained environments. In this paper, we propose a robust and safe trajectory…
We study a problem of optimal allocation in a discrete-time multi-period pure-exchange economy, where agents have preferences over stochastic endowment processes that are represented by strongly time-consistent dynamic risk measures. We…
We consider a finite horizon optimal stopping problem related to trade-off strategies between expected profit and cost cash-flows of an investment under uncertainty. The optimal problem is first formulated in terms of a system of Snell…
In this paper, we model the cash surplus (or equity) of a risky business with a Brownian motion. Owners can take cash out of the surplus in the form of "dividends", subject to transaction costs. However, if the surplus hits 0 then ruin…
This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depend on an external process of economic factors. There are transaction costs with a structure that…