Related papers: Zero-Leverage Puzzle
The manipulation of LIBOR by a group of banks became one of the major blows to the remaining confidence in financial industry. Yet, despite an enormous amount of popular literature on the subject, rigorous time-series studies are few. In my…
We find the optimal investment strategy for an individual who seeks to minimize one of four objectives: (1) the probability that his wealth reaches a specified ruin level {\it before} death, (2) the probability that his wealth reaches that…
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…
We study in details the skew of stock option smiles, which is induced by the so-called leverage effect on the underlying -- i.e. the correlation between past returns and future square returns. This naturally explains the anomalous…
We study Bayesian Persuasion with multiple senders who have access to conditionally independent experiments (and possibly others). Senders have zero-sum preferences over information revealed. We characterize when any set of states can be…
Company mergers and acquisitions are often perceived to act as catalysts for corporate growth in free markets systems: it is conventional wisdom that those activities lead to better and more efficient markets. However, the broad adoption of…
We consider the problem of determining a sequence of payments among a set of entities that clear (if possible) the liabilities among them. We formulate this as an optimal control problem, which is convex when the objective function is, and…
One 'problem' with the 21st century world, particularly the economic and business worlds, is the phenomenal and increasing number of interconnections between economic agents (consumers, firms, banks, markets, national economies). This…
The international financial system is currently not yet prepared to face a foreseeable crisis mainly motivated by the dichotomy between the real economy and the virtual economy. Skepticism is widespread even when it comes to investments in…
The basic financial purpose of an enterprise is maximization of its value. Trade credit management should also contribute to realization of this fundamental aim. Many of the current asset management models that are found in financial…
Self-evolving skill libraries face a silent failure mode we term \emph{library drift}: unbounded skill accumulation without outcome-driven lifecycle management causes retrieval degradation, false-positive injections, and performance…
International trade and logistics are subject to factors including geopolitical instability, climate change, and black swan events such as the unforeseen closure of the Suez Canal. The problem of predicting local price change under…
Auto-deleveraging (ADL) mechanisms are a critical yet understudied component of risk management on cryptocurrency futures exchanges. When available margin and other loss-absorbing resources are insufficient to cover losses following large…
We argue that an important contributing factor into market inefficiency is the lack of a robust mechanism for the stock price to rise if a company has good earnings, e.g., via buybacks/dividends. Instead, the stock price is prone to…
We study equilibria of markets with $m$ heterogeneous indivisible goods and $n$ consumers with combinatorial preferences. It is well known that a competitive equilibrium is not guaranteed to exist when valuations are not gross substitutes.…
This work re-examines the commonly held assumption that the frequency of rewards is a reliable measure of task difficulty in reinforcement learning. We identify and formalize a structural challenge that undermines the effectiveness of…
Stability of the utility maximization problem with random endowment and indifference prices is studied for a sequence of financial markets in an incomplete Brownian setting. Our novelty lies in the nonequivalence of markets, in which the…
When deploying artificial skills, decision-makers often assume that layering human oversight is a safe harbor that mitigates the risks of full automation in high-complexity tasks. This paper formally challenges the economic validity of this…
This paper casts within a unified economic framework some key challenges for the global economic order: de-globalization; the rising impracticability of global cooperation; and the increasingly confrontational nature of Great Power…
We study interactions with uncertainty about demand sensitivity. In our solution concept (1) firms choose seemingly-optimal strategies given the level of sophistication of their data analytics, and (2) the levels of sophistication form best…