Related papers: Insurance makes wealth grow faster
Sparsity or complexity? In modern high-dimensional asset pricing, these are often viewed as competing principles: richer feature spaces appear to favor complexity, while economic intuition has long favored parsimony. We show that this…
We study the two-times differentiability of the value functions of the primal and dual optimization problems that appear in the setting of expected utility maximization in incomplete markets. We also study the differentiability of the…
This paper studies the income fluctuation problem with capital income risk (i.e., dispersion in the rate of return to wealth). Wealth returns and labor earnings are allowed to be serially correlated and mutually dependent. Rewards can be…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
We find the asymptotics of the value function maximizing the expected utility of discounted dividend payments of an insurance company whose reserves are modeled as a classical Cram\'er risk process, with exponentially distributed claims,…
This study provides the solution to the equity premium puzzle. The new model was developed by including the behavior of investors toward risk in financial markets in prior studies. The calculations of this newly tested model show that the…
We introduce heterogeneous R&D productivities into an endogenous R&D network formation model, generalizing the framework of Goyal and Moraga-Gonz\'alez (2001). Heterogeneous productivities endogenously create asymmetric gains from…
Essential to each other, growth and exploration are jointly observed in populations, be it alive such as animals and cells or inanimate such as goods and money. But their ability to move, crucial to cope with uncertainty and optimize…
This paper studies a Value-at-Risk (VaR)-regulated optimal portfolio problem of the equity holders of a participating life insurance contract. In a setting with unhedgeable mortality risk and complete financial market, the optimal solution…
In this article, we employ a principal-agent model to analyze optimal contract design in a monopolistic reinsurance market under adverse selection with a continuum of insurer types. Instead of using the classical expected utility framework,…
A drawdown constraint forces the current wealth to remain above a given function of its maximum to date. We consider the portfolio optimisation problem of maximising the long-term growth rate of the expected utility of wealth subject to a…
It has been widely observed that capitalization-weighted indexes can be beaten by surprisingly simple, systematic investment strategies. Indeed, in the U.S. stock market, equal-weighted portfolios, random-weighted portfolios, and other…
We consider an investor who wants to select her/his optimal consumption, investment and insurance policies. Motivated by new insurance products, we allow not only the financial marke but also the insurable loss to depend on the regime of…
We propose a two-layer stochastic game model to study reinsurance contracting and competition in a market with one insurer and two competing reinsurers. The insurer negotiates with both reinsurers simultaneously for proportional reinsurance…
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…
Automation raises productivity and reduces paid human labor, but it also reallocates income and ownership claims. This paper studies that tradeoff in a static benchmark and in a stationary heterogeneous-agent general equilibrium. Firms…
In order to describe the properties of the observed distribution of wealth in a population, most economic models rely on the existence of an asymptotic equilibrium state. In addition, the process generating the equilibrium distribution is…
Many high-stakes AI deployments proceed only if every stakeholder deems the system acceptable relative to their own minimum standard. With randomization over a finite menu of options, this becomes a feasibility question: does there exist a…
Simple agent based exchange models are a commonplace in the study of wealth distribution of artificial societies. Generally, each agent is characterized by its wealth and by a risk-aversion factor, and random exchanges between agents allow…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…