Related papers: Optimal Bailouts in Diversified Financial Networks
The problem of resource allocation of nonlinear networked control systems is investigated, where, unlike the well discussed case of triggering for stability, the objective is optimal triggering. An approximate dynamic programming approach…
Stochastic neural net weights are used in a variety of contexts, including regularization, Bayesian neural nets, exploration in reinforcement learning, and evolution strategies. Unfortunately, due to the large number of weights, all the…
The recent "correlation breakdown" in the modeling of credit default swaps, in which model correlations had to exceed 100% in order to reproduce market prices of supersenior tranches, is analyzed and argued to be a fundamental market…
Ensuring the security of networked systems is a significant problem, considering the susceptibility of modern infrastructures and technologies to adversarial interference. A central component of this problem is how defensive resources…
We study an optimal investment problem under contagion risk in a financial model subject to multiple jumps and defaults. The global market information is formulated as a progressive enlargement of a default-free Brownian filtration, and the…
In dynamic capital structure models with an investor break-even condition, the firm's Bellman equation may not generate a contraction mapping, so the standard existence and uniqueness conditions do not apply. First, we provide an example…
We introduce a class of distributed control policies for networks of discrete-time linear systems with polytopic additive disturbances. The objective is to restrict the network-level state and controls to user-specified polyhedral sets for…
This paper studies the problem of optimal investment in incomplete markets, robust with respect to stopping times. We work on a Brownian motion framework and the stopping times are adapted to the Brownian filtration. Robustness can only be…
This paper studies the problem of intervention design for steering the actions of noncooperative players in quadratic network games to the social optimum. The players choose their actions with the aim of maximizing their individual payoff…
A new procedure is presented for the objective comparison and evaluation of default definitions. This allows the lender to find a default threshold at which the financial loss of a loan portfolio is minimised, in accordance with Basel II.…
We study capital requirements for bounded financial positions defined as the minimum amount of capital to invest in a chosen eligible asset targeting a pre-specified acceptability test. We allow for general acceptance sets and general…
A key problem in network theory is how to reconfigure a graph in order to optimize a quantifiable objective. Given the ubiquity of networked systems, such work has broad practical applications in a variety of situations, ranging from drug…
Many policy problems involve designing individualized treatment allocation rules to maximize the equilibrium social welfare of interacting agents. Focusing on large-scale simultaneous decision games with strategic complementarities, we…
In this paper the problem of optimal derivative design, profit maximization and risk minimization under adverse selection when multiple agencies compete for the business of a continuum of heterogenous agents is studied. The presence of ties…
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…
We study a game-theoretic variant of the maximum circulation problem. In a flow allocation game, we are given a directed flow network. Each node is a rational agent and can strategically allocate any incoming flow to the outgoing edges.…
The Fixed-Charge Network Flow problem is a well-studied NP-hard problem that has the goal of finding a flow in a network where fixed edge costs are incurred, regardless of the amount of flow hosted by the edge. In this paper, we consider…
Based on a point of view that solvency and security are first, this paper considers regular-singular stochastic optimal control problem of a large insurance company facing positive transaction cost asked by reinsurer under solvency…
We consider a network of bank holdings, where every holding has two subsidiaries of different types. A subsidiary can trade with another holding's subsidiary of the same type. Holdings support their subsidiaries up to a certain level when…
We focus on robust, survivable communication networks, where network links and nodes are affected by an uncertainty set. In this sense, any network links might fail. Besides, a signal can only travel a maximum distance before its quality…