Related papers: Bailouts and Redistribution
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 the bail-out optimal dividend problem with regime switching under the constraint that the cumulative dividend strategy is absolutely continuous. We confirm the optimality of the regime-modulated refraction-reflection…
We study the optimal decisions and equilibria of agents who aim to minimize their risks by allocating their positions over extremely heavy-tailed (i.e., infinite-mean) and possibly dependent losses. The loss distributions of our focus are…
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…
We analyze the household savings problem in a general setting where returns on assets, non-financial income and impatience are all state dependent and fluctuate over time. All three processes can be serially correlated and mutually…
We consider a diffusive model for optimally distributing dividends, while allowing for Knightian model ambiguity concerning the drift of the surplus process. We show that the value function is the unique solution of a non-linear…
We consider the dividend maximization problem including a ruin penalty in a diffusion environment. The additional penalty term is motivated by a constraint on dividend strategies. Intentionally, we use different discount rates for the…
We investigate the impact of capital gains taxes on optimal investment decisions in a quite simple model. Namely, we consider a risk neutral investor who owns one risky stock from which she assumes that it has a lower expected return than…
This paper examines optimal risk sharing for empirically realistic risk attitudes, providing results on Pareto optimality, competitive equilibria, utility frontiers, and the first and second theorems of welfare. Contrary to common…
This paper studies the optimal dividend for a multi-line insurance group, in which each subsidiary runs a product line and is exposed to some external credit risk. The default contagion is considered such that one default event may increase…
We study the problem of designing a two-sided market (double auction) to maximize the gains from trade (social welfare) under the constraints of (dominant-strategy) incentive compatibility and budget-balance. Our goal is to do so for an…
In this paper, we study the optimal control problem for a company whose surplus process evolves as an upward jump diffusion with random return on investment. Three types of practical optimization problems faced by a company that can control…
The financial and economic crisis recently experienced by many European countries has increased demand for timely, coherent and consistent distributional information for the household sector. In the Euro area, most of the NCBs collect such…
In this article, we study the optimization of resource distributions in a one-dimensional logistic diffusive model. The goal is to determine a distribution on a bounded one-dimensional domain that maximizes the total population at…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…
Persistent wealth inequality, where a small fraction of the population accumulates most resources while the majority remains economically vulnerable, is a widespread phenomenon. We investigate its underlying mechanisms using an agent-based…
We consider an investor who wants to select her/his optimal consumption, investment and insurance policies. Motivated by new insurance products, we allow not only the financial marke but also the insurable loss to depend on the regime of…
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…
This paper studies the dividend and capital injection problem under a diffusion risk model with general discount functions. A proportional cost is imposed when injecting capitals. For exponential discounting as time-consistent benchmark, we…
In Bai and Paulsen (SIAM J. Control optim. 48, 2010) the optimal dividend problem under transaction costs was analyzed for a rather general class of diffusion processes. It was divided into several subclasses, and for the majority of…