Related papers: Risk exchange under infinite-mean Pareto models
This paper attempts to find a relationship between agents' risk aversion and inequality of incomes. Specifically, a model is proposed for the evolution in time of surplus/deficit distribution, and the long-time distributions are…
The distribution of wealth among the members of a society is herein assumed to result from two fundamental mechanisms, trade and investment. An empirical distribution of wealth shows an abrupt change between the low-medium range, that may…
Modelling excesses over a high threshold using the Pareto or generalized Pareto distribution (PD/GPD) is the most popular approach in extreme value statistics. This method typically requires high thresholds in order for the (G)PD to fit…
This study considers a model of the income distribution of agents whose pairwise interaction is asymmetric and price-invariant. Asymmetric transactions are typical for chain-trading groups who arrange their business such that commodities…
We study Stackelberg Equilibria (Bowley optima) in a monopolistic centralized sequential-move insurance market, with a profit-maximizing insurer who sets premia using a distortion premium principle, and a single policyholder who seeks to…
Using a model of wealth distribution where traders are characterized by quenched random saving propensities and trade among themselves by bipartite transactions, we mimic the enhanced rates of trading of the rich by introducing the…
Any optimization algorithm based on the risk parity approach requires the formulation of portfolio total risk in terms of marginal contributions. In this paper we use the independence of the underlying factors in the market to derive the…
In this work, we study a dynamic portfolio optimization problem related to pairs trading, which is an investment strategy that matches a long position in one security with a short position in another security with similar characteristics.…
For effective decision support in scenarios with conflicting objectives, sets of potentially optimal solutions can be presented to the decision maker. We explore both what policies these sets should contain and how such sets can be computed…
In many competitive settings, from education to politics, rules do not reward effort evenly, and thresholds (e.g., grade cutoffs or electoral majorities) make some moments disproportionately important. Success thus depends on efficiently…
Recently some papers, such as Aban, Meerschaert and Panorska (2006), Nuyts (2010) and Clark (2013), have drawn attention to possible truncation in Pareto tail modelling. Sometimes natural upper bounds exist that truncate the probability…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
We studied the behavior and variation of utility between the two conflicting players in a closed Nash-equilibrium loop. Our modeling approach also captured the nexus between optimal premium strategizing and firm performance using the…
Risk-sharing is one way to pool risks without the need for a third party. To ensure the attractiveness of such a system, the rule should be accepted and understood by all participants. A desirable risk-sharing rule should fulfill actuarial…
Machine learning applications frequently come with multiple diverse objectives and constraints that can change over time. Accordingly, trained models can be tuned with sets of hyper-parameters that affect their predictive behavior (e.g.,…
We propose a mean functional which exists for any probability distributions, and which characterizes the Pareto distribution within the set of distributions with finite left endpoint. This is in sharp contrast to the mean excess plot which…
Limited liability creates a conflict of interests between policyholders and shareholders of insurance companies. It provides shareholders with incentives to increase the risk of the insurer's assets and liabilities which, in turn, might…
We consider a problem where multiple agents must learn an action profile that maximises the sum of their utilities in a distributed manner. The agents are assumed to have no knowledge of either the utility functions or the actions and…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
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…