Related papers: Debt Aversion: Theory and Measurement
Risk aversion and insurance are two prominent and interconnected concepts in economics and finance. To explore their fundamental connection, we introduce risk-insurance parity, which associates various classes of insurance contracts with…
This paper analyzes the hypothesis that returns play a risk-compensating role in the market for corporate revolving lines of credit. Specifically, we test whether borrower risk and the expected return on these debt instruments are…
We propose and axiomatize preferences on a product state space in light of uncertainty regarding the dependency of different payoff-relevant factors. Dependence structures allow to decompose probabilities and allow to pin down behavior…
The issue of model risk in default modeling has been known since inception of the Academic literature in the field. However, a rigorous treatment requires a description of all the possible models, and a measure of the distance between a…
If individuals at the highest mortality risk are also least likely to lapse a life insurance policy, then lapse-supported premiums magnify adverse selection costs. As an example, we model 'Term to 100' contracts, and risk as revealed by…
Modelling Consumer Indebtedness has proven to be a problem of complex nature. In this work we utilise Data Mining techniques and methods to explore the multifaceted aspect of Consumer Indebtedness by examining the contribution of…
We design and implement lab experiments to evaluate the normative appeal of behavior arising from models of ambiguity-averse preferences. We report two main empirical findings. First, we demonstrate that behavior reflects an incomplete…
The European debt purchase market as measured by the total book value of purchased debt approached 25bn euros in 2020 and it was growing at double-digit rates. This is an example of how big the debt collection and debt purchase industry has…
Background: Technical debt (TD) has been widely discussed in software engineering research, and there is an emerging literature linking it to developer characteristics. However, developer personality has not yet been studied in this…
We consider a model of debt management, where a sovereign state trade some bonds to service the debt with a pool of risk-neutral competitive foreign investors. At each time, the government decides which fraction of the gross domestic…
The demand for voluntary insurance against low-probability, high-impact risks is lower than expected. To assess the magnitude of the demand, we conduct a meta-analysis of contingent valuation studies using a dataset of experimentally…
We find it is common for consumers who are not in financial distress to make credit card payments at or close to the minimum. This pattern is difficult to reconcile with economic factors but can be explained by minimum payment information…
It is common to encounter the situation with uncertainty for decision makers (DMs) in dealing with a complex decision making problem. The existing evidence shows that people usually fear the extreme uncertainty named as the unknown. This…
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
We consider the problem of Adverse Selection and optimal derivative design within a Principal-Agent framework. The principal's income is exposed to non-hedgeable risk factors arising, for instance, from weather or climate phenomena. She…
Online learning has traditionally focused on the expected rewards. In this paper, a risk-averse online learning problem under the performance measure of the mean-variance of the rewards is studied. Both the bandit and full information…
We present an elementary analysis of the dynamical aspects of the GDP / government surplus multiplier with relevance to the assessment of a country's debt repayment policy. We show the (at first) counter intuitive result that in order to…
We investigate a framework for robo-advisors to estimate non-expert clients' risk aversion using adaptive binary-choice questionnaires. We model risk aversion using cost functions and spectral risk measures in a static setting. We prove the…
Loan seasoning and inefficient consumer interest rate refinance behavior are well-known for mortgages. Consumer automobile loans, which are collateralized loans on a rapidly depreciating asset, have attracted less attention, however. We…
Technical debt is a metaphor used to convey the idea that doing things in a "quick and dirty" way when designing and constructing a software leads to a situation where one incurs more and more deferred future expenses. Similarly to…