Related papers: Optimal macroprudential policy with preemptive bai…
This paper brings together divergent approaches to time inconsistency from macroeconomic policy and behavioural economics. Behavioural discount functions from behavioural microeconomics are embedded into a game-theoretic analysis of…
Incentives in experimental design are often misaligned: experimenters design and finance experiments to seek regulatory approval, while regulators seek to maximize social-welfare. We propose a framework to resolve this conflict, wherein…
We study the policy testing problem in discounted Markov decision processes (MDPs) in the fixed-confidence setting under a generative model with static sampling. The goal is to decide whether the value of a given policy exceeds a specified…
This paper analyzes whether a minimum wage should be used for redistribution on top of taxes and transfers. I characterize optimal redistribution for a government with three policy instruments -- labor income taxes and transfers, corporate…
We consider a social planner faced with a stream of myopic selfish agents. The goal of the social planner is to maximize the social welfare, however, it is limited to using only information asymmetry (regarding previous outcomes) and cannot…
Do we know if a short selling ban or a Tobin Tax result in more stable asset prices? Or do they in fact make things worse? Just like medicine regulatory measures in financial markets aim at improving an already complex system. And just like…
Reinforcement learning has been explored for many problems, from video games with deterministic environments to portfolio and operations management in which scenarios are stochastic; however, there have been few attempts to test these…
We consider an insurance company modelling its surplus process by a Brownian motion with drift. Our target is to maximise the expected exponential utility of discounted dividend payments, given that the dividend rates are bounded by some…
We introduce a prototype agent-based model of the macroeconomy, with budgetary constraints at its core. The model is related to a class of constraint satisfaction problems (CSPs), which has been thoroughly investigated in computer science.…
In this paper, making use of recent statistical physics techniques and models, we address the specific role of randomness in financial markets, both at the micro and the macro level. In particular, we review some recent results obtained…
A drawdown constraint forces the current wealth to remain above a given function of its maximum to date. We consider the portfolio optimisation problem of maximising the long-term growth rate of the expected utility of wealth subject to a…
We consider a broker who has to place a large order which consumes a sizable part of average daily trading volume. The broker's aim is thus to minimize execution costs he incurs from the adverse impact of his trades on market prices. By…
We consider the problem of determining a sequence of payments among a set of entities that clear (if possible) the liabilities among them. We formulate this as an optimal control problem, which is convex when the objective function is, and…
The dynamic portfolio optimization problem in finance frequently requires learning policies that adhere to various constraints, driven by investor preferences and risk. We motivate this problem of finding an allocation policy within a…
We consider a simple control problem in which the underlying dynamics depend on a parameter that is unknown and must be learned. We exhibit a control strategy which is optimal to within a multiplicative constant. While most authors find…
We consider an optimal investment and risk control problem for an insurer under the mean-variance (MV) criterion. By introducing a deterministic auxiliary process defined forward in time, we formulate an alternative time-consistent problem…
We propose a general framework for studying optimal impulse control problem in the presence of uncertainty on the parameters. Given a prior on the distribution of the unknown parameters, we explain how it should evolve according to the…
Inspired by recent ideas on how the analysis of complex financial risks can benefit from analogies with independent research areas, we propose an unorthodox framework for mapping microfinance credit risk---a major obstacle to the…
An investor with constant relative risk aversion and an infinite planning horizon trades a risky and a safe asset with constant investment opportunities, in the presence of small transaction costs and a binding exogenous portfolio…
We consider controlling the paths of a spectrally negative L\'evy process by two means: the subtraction of `taxes' when the process is at an all-time maximum, and the addition of `bailouts' which keep the value of the process above zero. We…