Related papers: Land and Infinite Debt Rollover
Different models of capital exchange among economic agents have been proposed recently trying to explain the emergence of Pareto's wealth power law distribution. One important factor to be considered is the existence of risk aversion. In…
The use of equilibrium models in economics springs from the desire for parsimonious models of economic phenomena that take human reasoning into account. This approach has been the cornerstone of modern economic theory. We explain why this…
Financial networks are characterized by complex structures of mutual obligations. These obligations are fulfilled entirely or in part (when defaults occur) via a mechanism called clearing, which determines a set of payments that settle the…
Machine learning applications frequently come with multiple diverse objectives and constraints that can change over time. Accordingly, trained models can be tuned with sets of hyper-parameters that affect their predictive behavior (e.g.,…
We investigate a market without money in which agents can offer certain goods (or multiple copies of an agent-specific good) in exchange for goods of other agents. The exchange must be balanced in the sense that each agent should receive a…
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…
We investigate the relation between economic growth and equality in a modified version of the agent-based asset exchange model (AEM). The modified model is a driven system that for a range of parameter space is effectively ergodic in the…
This paper derives a robust on-line equity trading algorithm that achieves the greatest possible percentage of the final wealth of the best pairs rebalancing rule in hindsight. A pairs rebalancing rule chooses some pair of stocks in the…
Consider a variant of Tetris played on a board of width $w$ and infinite height, where the pieces are axis-aligned rectangles of arbitrary integer dimensions, the pieces can only be moved before letting them drop, and a row does not…
Modern economies evolved from simpler human exchanges into very convoluted systems. Today, a multitude of aspects can be regulated, tampered with, or left to chance; these are economic {\em degrees of freedom} which together shape the flow…
We consider a risk-sensitive optimization of consumption-utility on infinite time horizon where the one-period investment gain depends on an underlying economic state whose evolution over time is assumed to be described by a discrete-time,…
Rising inequalities around the globe bring into question our economic systems and the origin of such inequalities. Here we propose a toy agent-based model where each entity is simultaneously producing and consuming indivisible goods. We…
Economic institutions often influence market outcomes not by directly controlling sellers' menus, but by shaping the market composition sellers face. We study the welfare effects of this upstream choice in a monopoly screening model. An…
This paper describes a discrete-time model of regularly-issued sovereign debt dynamics under a deficit-driven nominal debt growth regime that explicitly accounts for granular maturity. New issuance follows fixed allocations across a finite…
We study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential…
We consider a model of debt management, where a sovereign state trade some bonds to service the debt with a pool of risk-neutral competitive foreign investors. At each time, the government decides which fraction of the gross domestic…
We construct continuous-time equilibrium models based on a finite number of exponential utility investors. The investors' income rates as well as the stock's dividend rate are governed by discontinuous Levy processes. Our main result…
We consider finite-horizon restless bandits with multiple pulls per period, which play an important role in recommender systems, active learning, revenue management, and many other areas. While an optimal policy can be computed, in…
Pareto's law states that the distribution of personal income obeys a power-law in the high-income range, and has been supported by international observations. Researchers have proposed models over a century since its discovery. However, the…
The Keen model is a mathematical model that describes the dynamic evolution of wages, employment, and debt based on the known Minsky's Financial Instability Hypothesis. It consists of three first order nonlinear ordinary differential…