Related papers: Risk exchange under infinite-mean Pareto models
The paper studies an oligopolistic equilibrium model of financial agents who aim to share their random endowments. The risk-sharing securities and their prices are endogenously determined as the outcome of a strategic game played among all…
Pareto law, which states that wealth distribution in societies have a power-law tail, has been a subject of intensive investigations in statistical physics community. Several models have been employed to explain this behavior. However, most…
We consider multi-item exchange markets in which agents want to receive one of their target bundles of resources. The model encompasses well-studied markets for kidney exchange, lung exchange, and multi-organ exchange. We identify a general…
In risk analysis, a global fit that appropriately captures the body and the tail of the distribution of losses is essential. Modelling the whole range of the losses using a standard distribution is usually very hard and often impossible due…
In this article we show the relationship between the Pareto distribution and the gamma distribution. This shows that the second one, appropriately extended, explains some anomalies that arise in the practical use of extreme value theory.…
We study a problem of optimal allocation in a discrete-time multi-period pure-exchange economy, where agents have preferences over stochastic endowment processes that are represented by strongly time-consistent dynamic risk measures. We…
In financial markets marked by inherent volatility, extreme events can result in substantial investor losses. This paper proposes a portfolio strategy designed to mitigate extremal risks. By applying extreme value theory, we evaluate the…
We address the problem of sharing risk among agents with preferences modelled by a general class of comonotonic additive and law-based functionals that need not be either monotone or convex. Such functionals are called distortion…
This paper studies Pareto-optimal reinsurance design in a monopolistic market with multiple primary insurers and a single reinsurer, all with heterogeneous risk preferences. The risk preferences are characterized by a family of risk…
I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…
Our primary aim is to find an estimate of the expected shortfall in various situations: (1) Nonparametric situation, when the probability distribution of the incurred loss is unknown, only satisfying some general conditions. Then, following…
Diversification is usually viewed as a reliable way to reduce risk, yet it can dramatically fail for heavy-tailed losses with infinite mean: pooling independent losses of this type may increase tail risk at every threshold. We study this…
We analyze systems of agents sharing light-tailed risky claims issued by different financial objects. Assuming exponentially distributed claims, we obtain that both agents' and system's losses follow generalized exponential mixture…
We study Pareto efficiency in a pure-exchange economy where agents' preferences are represented by risk-averse monetary utilities. These coincide with law-invariant monetary utilities, and they can be shown to correspond to the class of…
We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…
The assignment problem is one of the most well-studied settings in social choice, matching, and discrete allocation. We consider the problem with the additional feature that agents' preferences involve uncertainty. The setting with…
For a risk vector $V$, whose components are shared among agents by some random mechanism, we obtain asymptotic lower and upper bounds for the individual agents' exposure risk and the aggregated risk in the market. Risk is measured by…
Estimation of tail quantities, such as expected shortfall or Value at Risk, is a difficult problem. We show how the theory of nonlinear expectations, in particular the Data-robust expectation introduced in [5], can assist in the…
This paper analyzes the equilibrium distribution of wealth in an economy where firms' productivities are subject to idiosyncratic shocks, returns on factors are determined in competitive markets, dynasties have linear consumption functions…
The stability of the financial system is associated with systemic risk factors such as the concurrent default of numerous small obligors. Hence it is of utmost importance to study the mutual dependence of losses for different creditors in…