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Many active funds hold concentrated portfolios. Flow-driven trading in these securities causes price pressure, which pushes up the funds' existing positions resulting in realized returns. We decompose fund returns into a price pressure…
In the context of micro-finance, a group of individuals undertake business projects that may interfere with one another. A contagious default happens if one person's project failure leads to the default of another group member. In this…
We show that subsets of interacting oscillators may synchronize in different ways within a single network. This diversity of synchronization patterns is promoted by increasing the heterogeneous distribution of coupling weights and/or…
Currently, pension providers are running into trouble mainly due to the ultra-low interest rates and the guarantees associated to some pension benefits. With the aim of reducing the pension volatility and providing adequate pension levels…
This paper studies an optimal investment and consumption problem with heterogeneous consumption of basic and luxury goods, together with the choice of time for retirement. The utility for luxury goods is not necessarily a concave function.…
We introduce new mathematical methods to study the optimal portfolio size of investment portfolios over time, considering investors with varying skill levels. First, we explore the benefit of portfolio diversification on an annual basis for…
In the article we consider accumulated values of annuities-certain with yearly payments with independent random interest rates. We focus on annuities with payments varying in arithmetic and geometric progression which are important basic…
The sustainability of cooperation is crucial for understanding the progress of societies. We study a repeated game in which individuals decide the share of their income to transfer to other group members. A central feature of our model is…
In order to deal with the aging problem, pension system is actively transformed into the funded scheme. However, the funded scheme does not completely replace PAYGO (Pay as You Go) scheme and there exist heterogeneous mixes among PAYGO, EET…
This study intends to present a representation of a pensions fund through a stochastic network with two infinite servers nodes. With this representation it is allowed to deduce an equilibrium condition of the system with basis on the…
We present a stylized model with feedback loops for the evolution of a population's wealth over generations. Individuals have both talent and wealth: talent is a random variable distributed identically for everyone, but wealth is a random…
This paper examines the optimal annuitization, investment and consumption strategies of a utility-maximizing retiree facing a stochastic time of death under a variety of institutional restrictions. We focus on the impact of aging on the…
We mathematically demonstrate how and what it means for two collective pension funds to mutually insure one another against systematic longevity risk. The key equation that facilitates the exchange of insurance is a market clearing…
We investigate the dynamics of wealth inequality in an economy where households have positional preferences, with the strength of the positional concern determined endogenously by inequality of wealth distribution in the society. We…
Recent research has documented a significant rise in the volatility (e.g., expected squared change) of individual incomes in the U.S. since the 1970s. Existing measures of this trend abstract from individual heterogeneity, effectively…
Tontines were once a popular type of mortality-linked investment pool. They promised enormous rewards to the last survivors at the expense of those died early. And, while this design appealed to the gambling instinc}, it is a suboptimal way…
In this paper we show how to hedge a zero coupon bond with a smaller amount of initial capital than required by the classical risk neutral paradigm, whose (trivial) hedging strategy does not suggest to invest in the risky assets. Long dated…
We consider a simple theoretical model to investigate the impact of inheritances on the wealth distribution. Wealth is described as a finite resource, which remains constant over different generations and is divided equally among offspring.…
Wealth inequality is an important matter for economic theory and policy. Ongoing debates have been discussing recent rise in wealth inequality in connection with recent development of active financial markets around the world. Existing…
Financial markets provide an ideal frame for studying decision making in crowded environments. Both the amount and accuracy of the data allows to apply tools and concepts coming from physics that studies collective and emergent phenomena or…