Related papers: Insuring uninsurable income
This paper presents an axiomatic scheme for interest rate models in discrete time. We take a pricing kernel approach, which builds in the arbitrage-free property and provides a link to equilibrium economics. We require that the pricing…
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…
We study a discrete-time consumption-based capital asset pricing model under expectations-based reference-dependent preferences. More precisely, we consider an endowment economy populated by a representative agent who derives utility from…
This paper develops a new framework for indirect statistical inference with guaranteed necessity and sufficiency, applicable to continuous random variables. We prove that when comparing exponentially transformed order statistics from an…
In the regime switching extension of Black-Scholes-Merton model of asset price dynamics, one assumes that the volatility coefficient evolves as a hidden pure jump process. Under the assumption of Markov regime switching, we have considered…
This paper proposes an alternative to the classical price-adjustment mechanism (called "t\^{a}tonnement" after Walras) that is second-order in time. The proposed mechanism, an analogue to the damped harmonic oscillator, provides a dynamic…
Survey data are widely used to study how income inequality, poverty, and welfare evolve over time. A common practice is to estimate the income distribution separately for each year, treating annual observations as independent…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
We study a continuous-time portfolio choice problem for an investor whose state-dependent preferences are determined by an exogenous factor that evolves as an It\^o diffusion process. Since risk attitudes at the end of the investment…
We have studied numerically the statistical mechanics of the dynamic phenomena, including money circulation and economic mobility, in some transfer models. The models on which our investigations were performed are the basic model proposed…
The aim of this work is to establish the personal income distribution from the elementary constituents of a free market; products of a representative good and agents forming the economic network. The economy is treated as a self-organized…
The distribution of income and wealth in developed economies exhibits a robust two-class structure: an exponential (Boltzmann--Gibbs) bulk covering $\sim\!97\%$ of the population, and a power-law (Pareto) tail in the upper $\sim\!3\%$. We…
In an arbitrage-free simple market, we demonstrate that for a class of state-dependent exponential utilities, there exists a unique prediction of the random risk aversion that ensures the consistency of optimal strategies across any time…
We study intergenerational transfers of income. In our stylized model, each generation in an infinite (but countable) stream is endowed with some income. An allocation rule associates with each infinite stream another stream, thus involving…
In this paper we introduce a sublinear conditional expectation with respect to a family of possibly nondominated probability measures on a progressively enlarged filtration. In this way, we extend the classic reduced-form setting for credit…
Income- and price-elasticity of demand quantify the responsiveness of markets to changes in income, and in prices, respectively. Under the assumptions of utility maximization and preference-independence (additive preferences), mathematical…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…
In a continuous time stochastic economy, this paper considers the problem of consumption and investment in a financial market in which the representative investor exhibits a change in the discount rate. The investment opportunities are a…
We study mechanism design in environments where agents have private preferences and private information about a common payoff-relevant state. In such settings with multi-dimensional types, standard mechanisms fail to implement efficient…
We consider the problem of optimizing the economic performance of nonlinear constrained systems subject to uncertain time-varying parameters and bounded disturbances. In particular, we propose an adaptive economic model predictive control…