Related papers: Insuring uninsurable income
A stochastic model with a continuum of economic agents often involves shocks at both macro and micro levels. This can be formalized by a continuum of random variables that are conditionally independent given the macro level shocks. Based on…
This paper studies dynamic mechanism design in a quasilinear Markovian environment and analyzes a direct mechanism model of a principal-agent framework in which the agent is allowed to exit at any period. We consider that the agent's…
We study welfare analysis for policy changes when supply and demand behavior are only partially known. We augment the robust approach pioneered by Kang and Vasserman (2025) by incorporating the supply side. We posit intervals of feasible…
We present a model describing the competition between information transmission and decision making in financial markets. The solution of this simple model is recalled, and possible variations discussed. It is shown numerically that despite…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
This study proposes a tractable stochastic choice model to identify motivations for prosocial behavior, and to explore alternative motivations of deliberate randomization beyond ex-ante fairness concerns. To represent social preferences, we…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
This paper proposes an iterative distributionally robust model predictive control (MPC) scheme to solve a risk-constrained infinite-horizon optimal control problem. In each iteration, the algorithm generates a trajectory from the starting…
We study a sequential resource allocation problem motivated by adaptive network recruitment, in which a limited budget of identical resources must be allocated over multiple rounds to individuals with stochastic referral capacity.…
This paper introduces a new parsimonious structure for mixture of autoregressive models. the weighting coefficients are determined through latent random variables, following a hidden Markov model. We propose a dynamic programming algorithm…
This paper considers general term structure models like the ones appearing in portfolio credit risk modelling or life insurance. We give a general model starting from families of forward rates driven by infinitely many Brownian motions and…
Many tractable TANK models treat redistribution as a contemporaneous wedge. I show that this view is incomplete once wage contracts are type-specific. In a tractable Two-Agent New Keynesian model, each household type adjusts its nominal…
We introduce a new class of forward performance processes that are endogenous and predictable with regards to an underlying market information set and, furthermore, are updated at discrete times. We analyze in detail a binomial model whose…
We propose a model in which dividend payments occur at regular, deterministic intervals in an otherwise continuous model. This contrasts traditional models where either the payment of continuous dividends is controlled or the dynamics are…
We introduce a new stochastic duration model for transaction times in asset markets. We argue that widely accepted rules for aggregating seemingly related trades mislead inference pertaining to durations between unrelated trades: while any…
This paper presents a hidden Markov model designed to investigate the complex nature of earnings persistence. The proposed model assumes that the residuals of log-earnings consist of a persistent component and a transitory component, both…
Picking sequences are well-established methods for allocating indivisible goods. Among the various picking sequences, recursively balanced picking sequences -- whereby each agent picks one good in every round -- are notable for guaranteeing…
This paper develops a continuous-time filtering framework for estimating a hazard rate subject to an unobservable change-point. This framework naturally arises in both financial and insurance applications, where the default intensity of a…
We propose an explainable regime-aware portfolio construction framework based on a strictly causal Wasserstein Hidden Markov Model. The model combines rolling Gaussian HMM inference with predictive model-order selection and template-based…