Related papers: Robust Optimal Risk Sharing and Risk Premia in Exp…
The equity risk premium puzzle is that the return on equities has far exceeded the average return on short-term risk-free debt and cannot be explained by conventional representative-agent consumption based equilibrium models. We review a…
Linear contracts are ubiquitous in practice, yet optimal contract theory often prescribes complex, nonlinear structures. We provide a distributional robustness justification for linear contracts. We study a principal-agent problem where the…
We develop a model for contagion in reinsurance networks by which primary insurers' losses are spread through the network. Our model handles general reinsurance contracts, such as typical excess of loss contracts. We show that simpler…
In this paper, we consider a dynamic coalition portfolio selection problem, with each agent's objective given by an Epstein--Zin recursive utility. To find a Pareto optimum, the coalition's problem is formulated as an optimization problem…
In this paper, we examine the effect of background risk on portfolio selection and optimal reinsurance design under the criterion of maximizing the probability of reaching a goal. Following the literature, we adopt dependence uncertainty to…
We consider the mechanism design problem of a principal allocating a single good to one of several agents without monetary transfers. Each agent desires the good and uses it to create value for the principal. We designate this value as the…
Bernard et al. (2015) study an optimal insurance design problem where an individual's preference is of the rank-dependent utility (RDU) type, and show that in general an optimal contract covers both large and small losses. However, their…
This paper studies robust forward investment and consumption preferences and optimal strategies for a risk-averse and ambiguity-averse agent in an incomplete financial market with drift and volatility uncertainties. We focus on non-zero…
We propose a new Robust Optimization method for the energy offering problem of a price-taker generating company that wants to build offering curves for its generation units, in order to maximize its profit while taking into account the…
We present a general approach to the pricing of products in finance and insurance in the multi-period setting. It is a combination of the utility indifference pricing and optimal intertemporal risk allocation. We give a characterization of…
Portfolio selection problems that optimize expected utility are usually difficult to solve. If the number of assets in the portfolio is large, such expected utility maximization problems become even harder to solve numerically. Therefore,…
We find the optimal indemnity to maximize the expected utility of terminal wealth of a buyer of insurance whose preferences are modeled by an exponential utility. The insurance premium is computed by a convex functional. We obtain a…
We consider the principal-agent problem with heterogeneous agents. Previous works assume that the principal signs independent incentive contracts with every agent to make them invest more efforts on the tasks. However, in many…
Planning under model uncertainty is a fundamental problem across many applications of decision making and learning. In this paper, we propose the Robust Adaptive Monte Carlo Planning (RAMCP) algorithm, which allows computation of…
This paper investigates a novel behavioral feature of recursive preferences: aversion to risks that persist over time, or simply \textit{correlation aversion}. Greater persistence provides information about future consumption but reduces…
Having a perfect model to compute the optimal policy is often infeasible in reinforcement learning. It is important in high-stakes domains to quantify and manage risk induced by model uncertainties. Entropic risk measure is an exponential…
In this paper, we investigate the features and the performance of the Risk Parity (RP) portfolios using the Mean Absolute Deviation (MAD) as a risk measure. The RP model is a recent strategy for asset allocation that aims at equally sharing…
We study a two-period moral hazard problem; there are two agents, with action sets that are unknown to the principal. The principal contracts with each agent sequentially, and seeks to maximize the worst-case discounted sum of payoffs,…
Optimistic rollups are a popular and promising method of increasing the throughput capacity of their underlying chain. These methods rely on economic incentives to guarantee their security. We present a model of optimistic rollups that…
This paper is the continuation of "Pricing with coherent risk" and deals with further applications of coherent risk measures to problems of finance. First, we study the optimization problem. Three forms of this problem are considered.…