Related papers: Debt Aversion: Theory and Measurement

Surrender poses one of the major risks to life insurance and a sound modeling of its true probability has direct implication on the risk capital demanded by the Solvency II directive. We add to the existing literature by performing…

One way to make decisions under uncertainty is to select an optimal option from a possible range of options, by maximizing the expected utilities derived from a probability model. However, under severe uncertainty, identifying precise…

Deployed prediction systems are often retrained on fixed calendars, even when model staleness and retraining burden vary over time. This short communication formulates retraining for Bayesian prediction systems as a cost-sensitive…

Agents' learning from feedback shapes economic outcomes, and many economic decision-makers today employ learning algorithms to make consequential choices. This note shows that a widely used learning algorithm, $\varepsilon$-Greedy, exhibits…

Predicting a customer's propensity-to-pay at an early point in the revenue cycle can provide organisations many opportunities to improve the customer experience, reduce hardship and reduce the risk of impaired cash flow and occurrence of…

When an insurance note is also a derivative a serious problem arises because a derivative must be fulfilled immediately. This feature of derivatives prevents claims processing procedures that screen out ineligible claims. This, in turn,…

Borrowing constraints are a key component of modern international macroeconomic models. The analysis of Emerging Markets (EM) economies generally assumes collateral borrowing constraints, i.e., firms access to debt is constrained by the…

While the investors' responses to price changes and their price forecasts are well accepted major factors contributing to large price fluctuations in financial markets, our study shows that investors' heterogeneous and dynamic risk aversion…

Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…

Mainstream bias, where some users receive poor recommendations because their preferences are uncommon or simply because they are less active, is an important aspect to consider regarding fairness in recommender systems. Existing methods to…

The process of consumer decision-making is multidimensional, and price perception is a very important but still not well-understood dimension for both marketers and consumers. Although heuristics or mental shortcuts are seen as biased and…

The existence of asymmetric information has always been a major concern for financial institutions. Financial intermediaries such as commercial banks need to study the quality of potential borrowers in order to make their decision on…

I examine whether the imposition of fiduciary duty on municipal advisors affects bond yields and advising fees. Using a difference-in-differences analysis, I show that bond yields reduce by $\sim$9\% after the imposition of the SEC…

We develop a model of wishful thinking that incorporates the costs and benefits of biased beliefs. We establish the connection between distorted beliefs and risk, revealing how wishful thinking can be understood in terms of risk measures.…

I model a rational agent who experiences endogenous deadline pressure in the face of a fixed future deadline. The agent holds a resource stock, and opportunities to spend resources arise randomly according to a Poisson process. When the…

Experiments suggest that people fail to take into account interdependencies between their choices -- they do not broadly bracket. Researchers often instead assume that people narrowly bracket, but existing designs do not test it. We design…

We study the associations between everyday economic decision-making quality and people's emotional states. Using high-frequency, highly disaggregated consumer "scanner" data, we show that the cost of poor decision-making is substantial, on…

This paper studies lying in a novel context. Previous work has focused on situations in which people are either fully aware of the economic consequences of all available actions (e.g., die-under-cup paradigm), or they are uncertain, but…

This article investigates the effect of prices and socio-demographic variables on the farmers decision to purchase agricultural insurance. A survey has been conducted to 200 farmers most of whom are engaged in diversified income-generating…

We study the societal impact of pseudo-scientific assumptions for predicting the behavior of people in a straightforward application of machine learning to risk prediction in financial lending. This use case also exemplifies the impact of…