Related papers: Centralized systemic risk control in the interbank…
The entropy regularization is inspired by information entropy from machine learning and the ideas of exploration and exploitation in reinforcement learning, which appears in the control problem to design an approximating algorithm for the…
The process of contagiousness spread modelling is well-known in epidemiology. However, the application of spread modelling to banking market is quite recent. In this work, we present a system of ordinary differential equations, simulating…
We consider a mean-field control problem in which admissible controls are required to be adapted to the common noise filtration. The main objective is to show how the mean-field control problem can be approximates by time consistent…
We pose the decumulation strategy for a Defined Contribution (DC) pension plan as a problem in optimal stochastic control. The controls are the withdrawal amounts and the asset allocation strategy. We impose maximum and minimum constraints…
This paper considers time-inconsistent problems when control and stopping strategies are required to be made simultaneously (called stopping control problems by us). We first formulate the timeinconsistent stopping control problems under…
We consider the problem of governing systemic risk in an assets-liabilities dynamical model of banking system. In the model considered each bank is represented by its assets and its liabilities.The capital reserves of a bank are the…
We study the continuous time portfolio optimization model on the market where the mean returns of individual securities or asset categories are linearly dependent on underlying economic factors. We introduce the functional $Q_\gamma$…
In this paper, we investigate a mean-field singular stochastic optimal control problem for systems governed by mean-field regime-switching singular stochastic differential equations. The state process is assumed to depend on both a regular…
We propose a simple model of inter-bank borrowing and lending where the evolution of the log-monetary reserves of $N$ banks is described by a system of diffusion processes coupled through their drifts in such a way that stability of the…
This paper studies an optimal investment and risk control problem for an insurer with default contagion and regime-switching. The insurer in our model allocates his/her wealth across multi-name defaultable stocks and a riskless bond under…
This paper is concerned with cost optimization of an insurance company. The surplus of the insurance company is modeled by a controlled regime switching diffusion, where the regime switching mechanism provides the fluctuations of the random…
This paper presents a dynamic game framework to analyze the role of large banks in interbank markets. By extending existing models, we incorporate a large bank as a dynamic decision-maker interacting with multiple small banks. Using the…
This paper investigates two mechanisms of financial contagion that are, firstly, the correlated exposure of banks to the same source of risk, and secondly the direct exposure of banks in the interbank market. It will consider a random…
We consider a stochastic game between a trader and a central bank in a target zone market with a lower currency peg. This currency peg is maintained by the central bank through the generation of permanent price impact, thereby aggregating…
Consider the problem of a central bank that wants to manage the exchange rate between its domestic currency and a foreign one. The central bank can purchase and sell the foreign currency, and each intervention on the exchange market leads…
We consider control-constrained linear-quadratic optimal control problems on evolving surfaces. In order to formulate well-posed problems, we prove existence and uniqueness of weak solutions for the state equation, in the sense of…
This article presents a constrained policy optimization approach for the optimal control of systems under nonstationary uncertainties. We introduce an assumption that we call Markov embeddability that allows us to cast the stochastic…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
In this paper, we address linear-quadratic-Gaussian (LQG) risk-sensitive mean field games (MFGs) with common noise. In this framework agents are exposed to a common noise and aim to minimize an exponential cost functional that reflects…
We present a control framework for stochastic compartmental models in epidemiology. In this framework, rather than directly controlling the stochastic system, we perform optimal control of an associated Fokker-Planck equation, with the goal…