Related papers: Risk Apportionment: The Dual Story
Using theory and experiments, this paper shows that the difficulty of making tradeoffs offers a parsimonious explanation for a wide range of behavioral phenomena. We develop a model of imprecise comparisons applicable to multiattribute,…
We present a simple approach to forecasting conditional probability distributions of asset returns. We work with a parsimonious specification of ordered binary choice regression that imposes a connection on sign predictability across…
In this paper, we extend the existing double linear policy by incorporating time-varying weights instead of constant weights and study a certain robustness property, called robust positive expectation (RPE), in a discrete-time setting. We…
A discrete time probabilistic model, for optimal equity allocation and portfolio selection, is formulated so as to apply to (at least) reinsurance. In the context of a company with several portfolios (or subsidiaries), representing both…
This paper expands the notion of robust profit opportunities in financial markets to incorporate distributional uncertainty using Wasserstein distance as the ambiguity measure. Financial markets with risky and risk-free assets are…
In this paper we derive robust super- and subhedging dualities for contingent claims that can depend on several underlying assets. In addition to strict super- and subhedging, we also consider relaxed versions which, instead of eliminating…
Cooperators that refuse to participate in sanctioning defectors create the second-order free-rider problem. Such cooperators will not be punished because they contribute to the public good, but they also eschew the costs associated with…
The general use of subjective probabilities to model belief has been justified using many axiomatic schemes. For example, ?consistent betting behavior' arguments are well-known. To those not already convinced of the unique fitness and…
Many models of economics assume that individuals distort objective probabilities. We propose a simple consistency condition on distortion functions, which we term distortion coherence, that ensures that the function commutes with…
We consider a dual risk model with constant expense rate and i.i.d. exponentially distributed gains $C_i$ ($i=1,2,\dots$) that arrive according to a renewal process with general interarrival times. We add to this classical dual risk model…
Consider an insurance company exposed to a stochastic economic environment that contains two kinds of risk. The first kind is the insurance risk caused by traditional insurance claims, and the second kind is the financial risk resulting…
We consider settings in which the distribution of a multivariate random variable is partly ambiguous. We assume the ambiguity lies on the level of the dependence structure, and that the marginal distributions are known. Furthermore, a…
We study the relationship between model complexity and out-of-sample performance in the context of mean-variance portfolio optimization. Representing model complexity by the number of assets, we find that the performance of low-dimensional…
Preferential attachment is a popular generative mechanism to explain the widespread observation of power law distributed networks. We introduce an alternative explanation for the phenomenon by allowing the link growth rates to vary across…
We develop a common semantic framework for the interpretation both of $\mathbf{IPC}$, the intuitionistic propositional calculus, and of logics weaker than $\mathbf{IPC}$ (substructural and subintuitionistic logics). This is done by proving…
We provide sufficient conditions for semi-nonparametric point identification of a mixture model of decision making under risk, when agents make choices in multiple lines of insurance coverage (contexts) by purchasing a bundle. As a first…
A classical portfolio theory deals with finding the optimal proportion in which an agent invests a wealth in a risk-free asset and a probabilistic risky asset. Formulating and solving the problem depend on how the risk is represented and…
We show that, in a resource allocation problem, the ex ante aggregate utility of players with cumulative-prospect-theoretic preferences can be increased over deterministic allocations by implementing lotteries. We formulate an optimization…
Risk aversion and insurance are two prominent and interconnected concepts in economics and finance. To explore their fundamental connection, we introduce risk-insurance parity, which associates various classes of insurance contracts with…
We consider a monopoly insurance market with a risk-neutral profit-maximizing insurer and a consumer with Yaari Dual Utility preferences that distort the given continuous loss distribution. The insurer observes the loss distribution but not…