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We consider a group of mean-variance investors with mimicking desire such that each investor is willing to penalize deviations of his portfolio composition from compositions of other group members. Penalizing norm constraints are already…
This paper analyzes a novel type of mortality contingent-claim called a ruin-contingent life annuity (RCLA). This product fuses together a path-dependent equity put option with a "personal longevity" call option. The annuitant's (i.e. long…
Decision-making individuals are typically either an imitator, who mimics the action of the most successful individual(s), a conformist (or coordinating individual), who chooses an action if enough others have done so, or a nonconformist (or…
We test the hypothesis that interconnections across financial institutions can be explained by a diversification motive. This idea stems from the empirical evidence of the existence of long-term exposures that cannot be explained by a…
Two critical questions about intergenerational outcomes are: one, whether significant barriers or traps exist between different social or economic strata; and two, the extent to which intergenerational outcomes do (or can be used to) affect…
This paper investigates the optimal consumption, investment, and life insurance/annuity decisions for a family in an inflationary economy under money illusion. The family can invest in a financial market that consists of nominal bonds,…
For an exponential utility maximizing investment strategy in a Black-Scholes Setting, fixed upper and lower constraints are introduced on the terminal wealth. This is equivalent to combining the optimal strategy with options. The resulting…
A fund manager invests both the fund's assets and own private wealth in separate but potentially correlated risky assets, aiming to maximize expected utility from private wealth in the long run. If relative risk aversion and investment…
In a capital adequacy framework, risk measures are used to determine the minimal amount of capital that a financial institution has to raise and invest in a portfolio of pre-specified eligible assets in order to pass a given capital…
Many countries around the world have had to carry out radical reforms periodically in their pension systems. Global experience shows that it is important to optimize the costs of pension and social security systems in order to ensure a…
This paper considers an optimal life insurance for a householder subject to mortality risk. The household receives a wage income continuously, which is terminated by unexpected (premature) loss of earning power or (planned and intended)…
Decision-making individuals often imitate their highest-earning fellows rather than optimize their own utilities, due to bounded rationality and incomplete information. Perpetual fluctuations between decisions have been reported as the…
We perform a stability analysis for the utility maximization problem in a general semimartingale model where both liquid and illiquid assets (random endowments) are present. Small misspecifications of preferences (as modeled via expected…
A well-interpretable measure of information has been recently proposed based on a partition obtained by intersecting a random sequence with its moving average. The partition yields disjoint sets of the sequence, which are then ranked…
It is known that the decision to purchase an annuity may be associated to an optimal stopping problem. However, little is known about optimal strategies, if the mortality force is a generic function of time and if the `subjective' life…
Seed fundraising for ventures often takes place by sequentially approaching potential contributors, who make observable decisions. The fundraising succeeds when a target number of investments is reached. Though resembling classic…
Optimal investment strategies of an individual worker during the accumulation phase in the defined contribution pension scheme have been well studied in the literature. Most of them adopted the classical backward model and approach, but any…
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…
I study linear panel data models with predetermined regressors (such as lagged dependent variables) where coefficients are individual-specific, allowing for heterogeneity in the effects of the regressors on the dependent variable. I show…
In this paper we present detailed simulation results on the wealth distribution model with quenched saving propensities. Unlike other wealth distribution models where the saving propensities are either zero or constant, this model is not…