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We study a model of a corporation which has the possibility to choose various production/business policies with different expected profits and risks. In the model there are restrictions on the dividend distribution rates as well as…
General equilibrium, the cornerstone of modern economics and finance, rests on assumptions many markets do not meet. Spectrum auctions, electricity markets, and cap-and-trade programs for resource rights often feature non-convexities in…
We consider a real options model for the optimal irreversible investment problem of a profit maximizing company. The company has the opportunity to invest into a production plant capable of producing two products, of which the prices follow…
This paper presents sufficient conditions for optimal control of systems with dynamics given by a linear operator, in order to obtain an explicit solution to the Bellman equation that can be calculated in a distributed fashion. Further, the…
In this paper we develop structural first passage models (AT1P and SBTV) with time-varying volatility and characterized by high tractability, moving from the original work of Brigo and Tarenghi (2004, 2005) [19] [20] and Brigo and Morini…
We present a reduction of the termination problem for a Turing machine (in the simplified form of the Post correspondence problem) to the problem of determining whether a continuous-time Markov chain presented as a set of Kappa…
In this paper, we present a simple microeconomic model with linear continuous-time dynamics that describes a production-inventory system with debt repayment. This model is formulated in terms of optimal control and its exact solutions are…
We study models of regulatory breakup, in the spirit of Strong and Fouque [Ann. Finance 7 (2011) 349-374] but with a fluctuating number of companies. An important class of market models is based on systems of competing Brownian particles:…
This paper considers consumption and portfolio optimization problems with recursive preferences in both infinite and finite time regions. Specially, the financial market consists of a risk-free asset and a risky asset that follows a general…
Motivated by the robustness of the capital distribution curves, we study the behavior of a certain polynomial equity market model as the number of companies goes to infinity. More precisely, we extend volatility-stabilized market models…
We consider an augmented version of Merton's portfolio choice problem, where trading by large investors influences the price of underlying financial asset leading to strategic interaction among investors, with investors deciding their…
We develop a generalization of the Black-Cox structural model of default risk. The extended model captures uncertainty related to firm's ability to avoid default even if company's liabilities momentarily exceeding its assets. Diffusion in a…
We consider a government that aims at reducing the debt-to-gross domestic product (GDP) ratio of a country. The government observes the level of the debt-to-GDP ratio and an indicator of the state of the economy, but does not directly…
This paper presents an analytically tractable and practically-oriented model of non-linear dynamics of a multi-asset market in the limit of a large number of assets. The asset price dynamics are driven by money flows into the market from…
We consider an optimal dividend payout problem for an insurance company whose surplus follows the classical Cram\'er-Lundberg model. The dividend rate is subject to a ratcheting constraint (i.e., it must be nondecreasing over time), and the…
An agent-based model for firms' dynamics is developed. The model consists of firm agents with identical characteristic parameters and a bank agent. Dynamics of those agents is described by their balance sheets. Each firm tries to maximize…
We model a nonlinear price curve quoted in a market as the utility indifference curve of a representative liquidity supplier. As the utility function we adopt a g-expectation. In contrast to the standard framework of financial engineering,…
In this paper we study stochastic dynamic games with many players; these are a fundamental model for a wide range of economic applications. The standard solution concept for such games is Markov perfect equilibrium (MPE), but it is well…
We analyze the stability properties of equilibrium solutions and periodicity of orbits in a two-dimensional dynamical system whose orbits mimic the evolution of the price of an asset and the excess demand for that asset. The construction of…
We propose a flexible stochastic framework for modeling the market share dynamics over time in a multiple markets setting, where firms interact within and between markets. Firms undergo stochastic idiosyncratic shocks, which contract their…