Related papers: Defaults: a double-edged sword in governing common…

The aim of this paper is to quantify and manage systemic risk caused by default contagion in the interbank market. We model the market as a random directed network, where the vertices represent financial institutions and the weighted edges…

We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…

We seek to understand when heterogeneity in user preferences yields improved outcomes in terms of overall cost. That this might be hoped for is based on the common belief that diversity is advantageous in many settings. We investigate this…

We analyze the practical consequences of the bilateral counterparty risk adjustment. We point out that past literature assumes that, at the moment of the first default, a risk-free closeout amount will be used. We argue that the legal…

This paper demonstrates how reinforcement learning can explain two puzzling empirical patterns in household consumption behavior during economic downturns. I develop a model where agents use Q-learning with neural network approximation to…

More often than not, bad decisions are bad regardless of where and when they are made. Information sharing might thus be utilized to mitigate them. Here we show that sharing the information about strategy choice between players residing on…

We propose two structural models for stochastic losses given default which allow to model the credit losses of a portfolio of defaultable financial instruments. The credit losses are integrated into a structural model of default events…

In economics and psychology, delay discounting is often used to characterize how individuals choose between a smaller immediate reward and a larger delayed reward. People with higher delay discounting rate (DDR) often choose smaller but…

Direct reciprocity facilitates the evolution of cooperation when individuals interact repeatedly. Most previous studies on direct reciprocity implicitly assume compulsory interactions. Yet, interactions are often voluntary in human…

We study online decision making problems under resource constraints, where both reward and cost functions are drawn from distributions that may change adversarially over time. We focus on two canonical settings: $(i)$ online resource…

Social dilemmas are situations in which collective interests are at odds with private interests: pollution, depletion of natural resources, and intergroup conflicts, are at their core social dilemmas. Because of their multidisciplinarity…

Many experimental studies report that economics students tend to act more selfishly than students of other disciplines, a finding that received widespread public and professional attention. Two main explanations that the existing literature…

Cooperation is a persistent behavioral pattern of entities pooling and sharing resources. Its ubiquity in nature poses a conundrum. Whenever two entities cooperate, one must willingly relinquish something of value to the other. Why is this…

The evolution of cooperation has remained an important problem in evolutionary theory and social sciences. In this regard, a curious question is why consistent cooperative and defective personalities exist and if they serve a role in the…

Online learning algorithms, widely used to power search and content optimization on the web, must balance exploration and exploitation, potentially sacrificing the experience of current users for information that will lead to better…

Human behavioral patterns and consumption paradigms have emerged as pivotal determinants in environmental degradation and climate change, with quotidian decisions pertaining to transportation, energy utilization, and resource consumption…

Biases in existing datasets used to train algorithmic decision rules can raise ethical and economic concerns due to the resulting disparate treatment of different groups. We propose an algorithm for sequentially debiasing such datasets…

We study financial networks where banks are connected through bilateral liabilities and may default when resources are insufficient to meet obligations. We consider both the standard proportional clearing model and a priority-proportional…

Diffusion models have achieved remarkable results in image generation, and have similarly been used to learn high-performing policies in sequential decision-making tasks. Decision-making diffusion models can be trained on lower-quality…

The risk-sensitive foraging theory formulated in terms of the (daily) energy budget rule has been influential in behavioural ecology as well as other disciplines. Predicting risk-aversion on positive budgets and risk-proneness on negative…