Related papers: Endogenous Persistence at the Effective Lower Boun…
We devise a stabilized method to weakly enforce bound constraints in the discrete solution of advection-dominated diffusion problems. This method combines a nonlinear penalty formulation with a discontinuous Galerkin-based residual…
This paper characterizes differentiable subgame perfect equilibria in a continuous time intertemporal decision optimization problem with non-constant discounting. The equilibrium equation takes two different forms, one of which is…
We analyze a simple macroeconomic model where rational inflation expectations is replaced by a boundedly rational, and genuinely sticky, response to changes in the actual inflation rate. The stickiness is introduced in a novel way using a…
We develop an estimator for applications where the variable of interest is endogenous and researchers have access to aggregate instruments. Our method addresses the critical identification challenge -- unobserved confounding, which renders…
We prove the existence of a Radner equilibrium in a model with proportional transaction costs on an infinite time horizon and analyze the effect of transaction costs on the endogenously determined interest rate. Two agents receive…
This paper considers time-inconsistent problems when control and stopping strategies are required to be made simultaneously (called stopping control problems by us). We first formulate the timeinconsistent stopping control problems under…
In a dynamic economy, we characterize the fiscal policy of the government when it levies distortionary taxes and issues defaultable bonds to finance its stochastic expenditure. Default may occur in equilibrium as it prevents the government…
We study the piecewise constant bandit problem where the expected reward is a piecewise constant function with one change point (discontinuity) across the action space $[0,1]$ and the learner's aim is to locate the change point. Under the…
Motivated by applications in economics and finance, in particular to the modeling of limit order books, we study a class of stochastic second-order PDEs with non-linear Stefan-type boundary interaction. To solve the equation we transform…
We consider the challenge of finding a deterministic policy for a Markov decision process that uniformly (in all states) maximizes one reward subject to a probabilistic constraint over a different reward. Existing solutions do not fully…
The paper tests the validity of the critique of the fiscal theory of the price level. A stochastic general equilibrium model with continuous time is constructed. An active fiscal policy and a passive monetary policy have been set. Monetary…
We establish sufficient conditions for the terminal cost and constraint such that economic model predictive control (MPC) is robustly recursively feasible and economically robust to small disturbances without any assumptions of…
We present a thorough empirical study on real interest rates by also including risk aversion through the introduction of the market price of risk. With the view of complex systems science and its multidisciplinary approach, we use the…
We study the problem of outlier robust high-dimensional mean estimation under a finite covariance assumption, and more broadly under finite low-degree moment assumptions. We consider a standard stability condition from the recent robust…
Optimal control problems are inherently hard to solve as the optimization must be performed simultaneously with updating the underlying system. Starting from an initial guess, Howard's policy improvement algorithm separates the step of…
We study stability of optimizers and convergence of Sinkhorn's algorithm for the entropic optimal transport problem. In the special case of the quadratic cost, our stability bounds imply that if one of the two entropic potentials is…
Policy learning algorithms are widely used in areas such as personalized medicine and advertising to develop individualized treatment regimes. However, most methods force a decision even when predictions are uncertain, which is risky in…
In this paper, we study the optimal investment problem of an insurer whose surplus process follows the diffusion approximation of the classical Cramer-Lundberg model. Investment in the foreign market is allowed, and therefore, the foreign…
Offline reinforcement learning is important in domains such as medicine, economics, and e-commerce where online experimentation is costly, dangerous or unethical, and where the true model is unknown. However, most methods assume all…
We propose a model in which, in exchange to the payment of a fixed transaction cost, an insurance company can choose the retention level as well as the time at which subscribing a perpetual reinsurance contract. The surplus process of the…