Related papers: Optimal macroprudential policy with preemptive bai…
When a loan is approved for a person or company, the bank is subject to \emph{credit risk}; the risk that the lender defaults. To mitigate this risk, a bank will require some form of \emph{security}, which will be collected if the lender…
We consider a scenario where a system experiences a disruption, and the states (representing health values) of its components continue to reduce over time, unless they are acted upon by a controller. Given this dynamical setting, we…
We study the problem of optimal risk policies and dividend strategies for an insurance company operating under the constraint that the timing of shareholder payouts is governed by the arrival times of a Poisson process. Concurrently, risk…
We consider mean-field control problems in discrete time with discounted reward, infinite time horizon and compact state and action space. The existence of optimal policies is shown and the limiting mean-field problem is derived when the…
We study price regulation for a monopolist operating in networked markets with demand spillovers. Achieving efficiency requires price reductions proportional to consumers' Katz-Bonacich centralities, which generally cannot be implemented by…
Optimal reinsurance when Value at Risk and expected surplus is balanced through their ratio is studied, and it is demonstrated how results for risk-adjusted surplus can be utilized. Simplifications for large portfolios are derived, and this…
This paper studies a systemic risk control problem by the central bank, which dynamically plans monetary supply to stabilize the interbank system with borrowing and lending activities. Facing both heterogeneity among banks and the common…
The process of contagiousness spread modelling is well-known in epidemiology. However, the application of spread modelling to banking market is quite recent. In this work, we present a system of ordinary differential equations, simulating…
We analyze a class of stochastic differential games of singular control, motivated by the study of a dynamic model of interbank lending with benchmark rates. We describe Pareto optima for this game and show how they may be achieved through…
We show that any objective risk measurement algorithm mandated by central banks for regulated financial entities will result in more risk being taken on by those financial entities than would otherwise be the case. Furthermore, the risks…
This paper provides a general characterization of subgame perfect equilibria for strategic timing problems, where two firms have the (real) option to make an irreversible investment. Profit streams are uncertain and depend on the market…
As demonstrated during the recent financial crisis, regulators require additional analytical tools to assess systemic risk in the financial sector. This paper describes one such tool; namely a novel market modeling and analysis capability.…
We study an optimal dividend problem under a bankruptcy constraint. Firms face a trade-off between potential bankruptcy and extraction of profits. In contrast to previous works, general cash flow drifts, including Ornstein--Uhlenbeck and…
We consider the problem of optimal consumption from labor income and investment in a general incomplete semimartingale market. The economic agent cannot borrow against future income, so the total wealth is required to be positive at (all or…
We study the problem of choosing optimal policy rules in uncertain environments using models that may be incomplete and/or partially identified. We consider a policymaker who wishes to choose a policy to maximize a particular counterfactual…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
We present a broad agenda for meaningful banking regulation reform aiming the creation of evolutive competitive environment to maximize the effectiveness of international financial system through the introduction of fair competition process…
While optimal taxation theory provides clear prescriptions for tax design, translating these insights into actual tax codes remains difficult. Existing work largely offers theoretical characterizations of optimal systems, while practical…
This study considers an optimal reinsurance, investment, and dividend strategy control problem for insurance companies in a regulated Markov regime-switching environment, intending to maximize long-run average reward. Unlike existing single…
A decision maker typically (i) incorporates training data to learn about the relative effectiveness of treatments, and (ii) chooses an implementation mechanism that implies an ``optimal'' predicted outcome distribution according to some…