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The incentive ratio measures the utility gains from strategic behaviour. Without any restrictions on the setup, ratios for linear, Leontief and Cobb-Douglas exchange markets are unbounded, showing that manipulating the equilibrium is a…
We investigate activities that have different periods of duration. We define the profit intensity as a measure of this economic category. The profit intensity in a repeated trading has a unique property of attaining its maximum at a fixed…
We introduce a spatial economic growth model where space is described as a network of interconnected geographic locations and we study a corresponding finite-dimensional optimal control problem on a graph with state constraints. Economic…
We study the optimal investment problem for a continuous time incomplete market model such that the risk-free rate, the appreciation rates and the volatility of the stocks are all random; they are assumed to be independent from the driving…
This paper investigates a robust optimal consumption, investment, and reinsurance problem for an insurer with Epstein-Zin recursive preferences operating under model uncertainty. The insurer's surplus follows the diffusion approximation of…
Stochastic dominance is a preference relation of uncertain prospect defined over a class of utility functions. While this utility class represents basic properties of risk aversion, it includes some extreme utility functions rarely…
In this paper the problem of optimal derivative design, profit maximization and risk minimization under adverse selection when multiple agencies compete for the business of a continuum of heterogenous agents is studied. The presence of ties…
We study a robust utility maximization problem in the unbounded case with a general penalty term and information including jumps. We focus on time consistent penalties and we prove that there exists an optimal probability measure solution…
The von Neumann and Morgenstern theory postulates that rational choice under uncertainty is equivalent to maximization of expected utility (EU). This view is mathematically appealing and natural because of the affine structure of the space…
The maximum entropy principle can be used to assign utility values when only partial information is available about the decision maker's preferences. In order to obtain such utility values it is necessary to establish an analogy between…
We consider the problems of estimation and optimization of utility-based shortfall risk (UBSR), which is a popular risk measure in finance. In the context of UBSR estimation, we derive a non-asymptotic bound on the mean-squared error of the…
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…
Models of economic decision makers often include idealized assumptions, such as rationality, perfect foresight, and access to all relevant pieces of information. These assumptions often assure the models' internal validity, but, at the same…
Benchmarks in the utility function have various interpretations, including performance guarantees and risk constraints in fund contracts and reference levels in cumulative prospect theory. In most literature, benchmarks are a deterministic…
This paper devises a way to apply the Bank and El Karoui Representation Theorem to find the investment boundary of a rich stochastic, continuous time capacity expansion problem with irreversible investment on the finite time interval $[0,…
We study the interaction between strategy, heterogeneity and growth in a two-agent model of capital accumulation. Preferences are represented by recursive utility functions with decreasing marginal impatience. The stationary equilibria of…
In the general framework of a semimartingale financial model and a utility function $U$ defined on the positive real line, we compute the first-order expansion of marginal utility-based prices with respect to a ``small'' number of random…
Linear dynamical systems that obey stochastic differential equations are canonical models. While optimal control of known systems has a rich literature, the problem is technically hard under model uncertainty and there are hardly any…
We study the optimal excess-of-loss reinsurance problem when both the intensity of the claims arrival process and the claim size distribution are influenced by an exogenous stochastic factor. We assume that the insurer's surplus is governed…
We provide an axiomatic foundation for the representation of num\'{e}raire-invariant preferences of economic agents acting in a financial market. In a static environment, the simple axioms turn out to be equivalent to the following choice…