Related papers: Bailouts and Redistribution
The scale and terms of aggregate borrowing in an economy depend on the manner in which wealth is distributed across potential creditors with heterogeneous beliefs about the future. This distribution evolves over time as uncertainty is…
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 optimal taxation when citizens are not fully confident that the government will transform tax revenue into useful public goods. In an otherwise standard Ramsey framework, a representative agent values a public good financed by…
We consider an insurance company whose surplus is represented by the classical Cramer-Lundberg process. The company can invest its surplus in a risk free asset and in a risky asset, governed by the Black-Scholes equation. There is a…
Suppliers of differentiated goods make simultaneous pricing decisions, which are strategically linked. Because of market power, the equilibrium is inefficient. We study how a policymaker should target a budget-balanced tax-and-subsidy…
Major events like natural catastrophes or the COVID-19 crisis have impact both on the financial market and on claim arrival intensities and claim sizes of insurers. Thus, when optimal investment and reinsurance strategies have to be…
This paper studies an optimal investment and risk control problem for an insurer with default contagion and regime-switching. The insurer in our model allocates his/her wealth across multi-name defaultable stocks and a riskless bond under…
Empirical research shows that individuals' responses to treatments vary along latent characteristics, such as innate ability or motivation. Therefore, a policymaker seeking to maximize welfare may consider designing policies based on…
In this paper we consider reinsurance or risk sharing from a macroeconomic point of view. Our aim is to find socially optimal reinsurance treaties. In our setting we assume that there are $n$ insurance companies each bearing a certain risk…
We consider a model of financial contagion in a bipartite network of assets and banks recently introduced in the literature, and we study the effect of power law distributions of degree and balance-sheet size on the stability of the system.…
We consider the optimal risk transfer from an insurance company to a reinsurer. The problem formulation considered in this paper is closely connected to the optimal portfolio problem in finance, with some crucial distinctions. In…
A financial system is represented by a network, where nodes correspond to banks, and directed labeled edges correspond to debt contracts between banks. Once a payment schedule has been defined, where we assume that a bank cannot refuse a…
This paper investigates dividend optimization of an insurance corporation under a more realistic model which takes into consideration refinancing or capital injections. The model follows the compound Poisson framework with credit interest…
This article concerns the optimal choice of flat taxes on labor and capital income, and on consumption, in a tractable economic model in which agents are subject to idiosyncratic investment risk. We identify the tax rates which maximize…
A government has to finance a risk for its population. It shares the charges among the population with a fixed scale based on economic criteria. Various organisms have to collect and to redistribute fairly the subsidies. Under these…
We characterize optimal monetary policy when policy endogenously moves risk premia through redistribution across agents who differ in their willingness to bear risk. The analytical core is Marginal Risk Capacity, the covariance of monetary…
The events of the last few years revealed an acute need for tools to systematically model and analyze large financial networks. Many applications of such tools include the forecasting of systemic failures and analyzing probable effects of…
We study optimal risk sharing among $n$ agents endowed with distortion risk measures. Our model includes market frictions that can either represent linear transaction costs or risk premia charged by a clearing house for the agents. Risk…
We consider a Ramsey model with several households with heterogeneous preferences who are able to borrow capital to each other. Since the capital constraints of one household then depends on the others' capital, one can no longer optimize…
This study examines the lack of redistributive effectiveness of consumption-based tax systems with respect to social fairness. Through numerical simulations, we explore the wealth exchanges among economic agents subject to flat consumption…