Related papers: Insuring uninsurable income
We study the design of efficient mechanisms under asymmetric awareness and information. Unawareness refers to the lack of conception rather than the lack of information. Assuming quasi-linear utilities and private values, we show that we…
We establish explicit socially optimal rules for an irreversible investment deci- sion with time-to-build and uncertainty. Assuming a price sensitive demand function with a random intercept, we provide comparative statics and economic…
The seminal impossibility result of Myerson and Satterthwaite (1983) states that for bilateral trade, there is no mechanism that is individually rational (IR), incentive compatible (IC), weakly budget balanced, and efficient. This has led…
In this paper we study the dynamics and ergodic theory of certain economic models which are implicitly defined. We consider 1-dimensional and 2-dimensional overlapping generations models, a cash-in-advance model, heterogeneous markets and a…
We introduce an extension to Merton's famous continuous time model of optimal consumption and investment, in the spirit of previous works by Pliska and Ye, to allow for a wage earner to have a random lifetime and to use a portion of the…
We consider a risk-sensitive optimization of consumption-utility on infinite time horizon where the one-period investment gain depends on an underlying economic state whose evolution over time is assumed to be described by a discrete-time,…
In an incomplete continuous-time securities market with uncertainty generated by Brownian motions, we derive closed-form solutions for the equilibrium interest rate and market price of risk processes. The economy has a finite number of…
We study the design of mechanisms under asymmetric awareness and information. While the mechanism designer cannot necessarily commit to a particular social choice function in the face of unawareness, she can at least commit to properties of…
This paper analyzes repeated version of the bilateral trade model where the independent payoff relevant private information of the buyer and the seller is correlated across time. Using this setup it makes the following five contributions.…
We propose an optimal-transport-based matching method to nonparametrically estimate linear models with independent latent variables. The method consists in generating pseudo-observations from the latent variables, so that the Euclidean…
We consider a small set of axioms for income averaging -- recursivity, continuity, and the boundary condition for the present. These properties yield a unique averaging function that is the density of the reflected Brownian motion with a…
We consider a generalization of the recursive utility model by adding a new component that represents utility of investment gains and losses. We also study the utility process in this generalized model with constant elasticity of…
Regime-switching models, in particular Hidden Markov Models (HMMs) where the switching is driven by an unobservable Markov chain, are widely-used in financial applications, due to their tractability and good econometric properties. In this…
In this paper we analyse a dynamic model of investment under uncertainty in a duopoly, in which each firm has an option to switch from the present market to a new market. We construct a subgame perfect equilibrium in mixed strategies and…
In this paper, we study the exponential utility indifference pricing of pure endowment policies within a stochastic-factor model for an insurer who also invests in a financial market. Our framework incorporates a hazard rate modeled as an…
Detailed knowledge of individual income dynamics is crucial for investigating the existence of the American dream: Are we able to improve our income status during our working life? This key question simply boils down to observing individual…
In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…
This paper introduces a novel stochastic control framework to enhance the capabilities of automated investment managers, or robo-advisors, by accurately inferring clients' investment preferences from past activities. Our approach leverages…
Using a panel of 102 countries from PWT 10.0 covering 1970-2019, we examine the veracity of the assumption that a time-homogeneous, first-order process describes the evolution of the cross-country distribution of per capita output, an…
Mixture models have received considerable attention recently and Newton [Sankhy\={a} Ser. A 64 (2002) 306--322] proposed a fast recursive algorithm for estimating a mixing distribution. We prove almost sure consistency of this recursive…