Related papers: Value at risk and the diversification dogma
We consider the problem of finding Pareto-optimal allocations of risk among finitely many agents. The associated individual risk measures are law invariant, but with respect to agent-dependent and potentially heterogeneous reference…
We consider the problem of Adverse Selection and optimal derivative design within a Principal-Agent framework. The principal's income is exposed to non-hedgeable risk factors arising, for instance, from weather or climate phenomena. She…
This paper concerns sequential computation of risk measures for financial data and asks how, given a risk measurement procedure, we can tell whether the answers it produces are `correct'. We draw the distinction between `external' and…
Reinforcement learning systems are often concerned with balancing exploration of untested actions against exploitation of actions that are known to be good. The benefit of exploration can be estimated using the classical notion of Value of…
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
We propose a method to assess the intrinsic risk carried by a financial position $X$ when the agent faces uncertainty about the pricing rule assigning its present value. Our approach is inspired by a new interpretation of the quasiconvex…
We study the dynamics of public opinion in a model in which agents change their opinions as a result of random binary encounters if the opinion difference is below their individual thresholds that evolve over time. We ground these…
This paper studies how violations of structural assumptions like expected utility and exponential discounting can be connected to basic rationality violations, even though these assumptions are typically regarded as independent building…
We consider a group consisting of N business units. We suppose there are regulatory constraints for each unit, more precisely, the net worth of each business unit is required to belong to a set of acceptable risks, assumed to be a convex…
We study random joint choice rules, allowing for interdependence of choice across agents. These capture random choice by multiple agents, or a single agent across goods or time periods. Our interest is in separable choice rules, where each…
Distributional reinforcement learning (RL) -- in which agents learn about all the possible long-term consequences of their actions, and not just the expected value -- is of great recent interest. One of the most important affordances of a…
Cooperation is a key driver of human social progress. Studies of the evolution of cooperation typically assume a deterministic outcome for social interactions. But in real-world social interactions, interaction outcomes are often subject to…
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
The intuition of risk is based on two main concepts: loss and variability. In this paper, we present a composition of risk and deviation measures, which contemplate these two concepts. Based on the proposed Limitedness axiom, we prove that…
This paper introduces the notions of independence and conditional independence in valuation-based systems (VBS). VBS is an axiomatic framework capable of representing many different uncertainty calculi. We define independence and…
This paper investigates the dynamics of gambling and how they can affect risk-taking behavior in regions not explored by Kahneman and Tversky's Prospect Theory. Specifically, it questions why extreme outcomes do not fit the theory and…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
Cybersecurity threat and risk analysis (RA) approaches are used to identify and mitigate security risks early-on in the software development life-cycle. Existing approaches automate only parts of the analysis procedure, leaving key…
An alternative to the dependence on traditional student loans may offer a viable relief from the tremendous burden that those loans usually incur. This article establishes that it is desirable for governmental intervention to grant students…
As we know, there is a controversy about the decision making under risk between economists and psychologists. We discuss to build a unified theory of risky choice, which would explain both of compensatory and non-compensatory theories. For…