Related papers: Phase transitions in debt recycling
We consider the relationship between economic activity and intervention, including monetary and fiscal policy, using a universal dynamic framework. Central bank policies are designed for growth without excess inflation. However,…
Diversification return is an incremental return earned by a rebalanced portfolio of assets. The diversification return of a rebalanced portfolio is often incorrectly ascribed to a reduction in variance. We argue that the underlying source…
Default risk calculus plays a crucial role in portfolio optimization when the risky asset is under threat of bankruptcy. However, traditional stochastic control techniques are not applicable in this scenario, and additional assumptions are…
For $n$ assets and discrete-time rebalancing, the probability to complete a given schedule of investments and withdrawals is maximized over progressively measurable portfolio weight functions. Applications consider two assets, namely the…
We present a simple model that uses time series momentum in order to construct strategies that systematically outperform their benchmark. The simplicity of our model is elegant: We only require a benchmark time series and several related…
We determine the optimal investment strategy of an individual who targets a given rate of consumption and who seeks to minimize the probability of going bankrupt before she dies, also known as {\it lifetime ruin}. We impose two types of…
Credit risk scorecards are logistic regression models, fitted to large and complex data sets, employed by the financial industry to model the probability of default of a potential customer. In order to ensure that a scorecard remains a…
Failure times of a machinery cannot always be assumed independent and identically distributed, e.g. if after reparations the machinery is not restored to a same-as-new condition. Framed within the renewal processes approach, a…
We propose a novel family of sales-based rebate mechanisms that induce network effects in sales of products that do not exhibit such externalities. The proposed rebate mechanisms enable the seller of a product with uncertain quality to…
We develop a methodology for index tracking and risk exposure control using financial derivatives. Under a continuous-time diffusion framework for price evolution, we present a pathwise approach to construct dynamic portfolios of…
We introduce simple cost and risk proxy metrics that can be attached to Treasury issuance strategy to complement analysis of the resulting portfolio weighted-average maturity (WAM). These metrics are based on mapping issuance fractions to…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
Mortgages account for the largest portion of household debt in the United States, totaling around \$12 trillion nationwide. In times of financial hardship, alleviating mortgage burdens is essential for supporting affected households. The…
Early-Exit (EE) is a Large Language Model (LLM) architecture that accelerates inference by allowing easier tokens to be generated using only a subset of the model's layers. However, traditional batching frameworks are ill-suited for EE…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
This paper develops a new model of business cycles. The model is economical in that it is solved with an aggregate demand-aggregate supply diagram, and the effects of shocks and policies are obtained by comparative statics. The model builds…
We introduce a new method to calculate the credit exposure of European and path-dependent options. The proposed method is able to calculate accurate expected exposure and potential future exposure profiles under the risk-neutral and the…
Progression and assessment rules are often treated as administrative details, yet they fundamentally shape who is allowed to remain in higher education, and on what terms. This article uses a calibrated agent-based model to examine how…
We consider the multi-refraction strategies in two equivalent versions of the optimal dividend problem in the dual (spectrally positive L\'evy) model. The first problem is a variant of the bail-out case where both dividend payments and…
The equity risk premium puzzle is that the return on equities has far exceeded the average return on short-term risk-free debt and cannot be explained by conventional representative-agent consumption based equilibrium models. We review a…