Related papers: Bailouts and Redistribution
This paper studies an optimal investment and consumption problem with heterogeneous consumption of basic and luxury goods, together with the choice of time for retirement. The utility for luxury goods is not necessarily a concave function.…
We consider a diffusion risk model where dividends are paid at rate $U(t) \in [0, u_0]$. We are interested in maximising the dividend payments under a drawdown constraint, that is, we penalise a drawdown size larger than a level $d > 0$. We…
We study monopoly regulation under asymmetric information about costs when subsidies are infeasible. A monopolist with privately known marginal cost serves a single product market and sets a price. The regulator maximizes a weighted welfare…
In our model, private actors with interbank cash flows similar to, but nore general than (Carmona, Fouque, Sun, 2013) borrow from the outside economy at a certain interest rate, controlled by the central bank, and invest in risky assets.…
We study the regulation of a monopolistic firm using a robust-design approach. We solve for the policy that minimizes the regulator's worst-case regret, where the regret is the difference between his complete-information payoff minus his…
Policymakers often face the decision of how to allocate resources across many different policies using noisy estimates of policy impacts. This paper develops a framework for optimal policy choices under statistical uncertainty. I consider a…
We examine the problem of optimal portfolio allocation within the framework of utility theory. We apply exponential utility to derive the optimal diversification strategy and logarithmic utility to determine the optimal leverage. We enhance…
In this paper, we study the optimal investment problem of an insurer whose surplus process follows the diffusion approximation of the classical Cramer-Lundberg model. Investment in the foreign market is allowed, and therefore, the foreign…
We study the risk criterion for investments based on the drawdown from the maximal value of the capital in the past. Depending on investor's risk attitude, thus his risk exposure, we find that the distribution of these drawdowns follows a…
This paper proposes and studies an optimal dividend problem in which a two-state regime-switching environment affects the dynamics of the company's cash surplus and, as a novel feature, also the bankruptcy level. The aim is to maximize the…
Herding, where investors imitate others' decisions rather than relying on their own analysis, is a prevalent phenomenon in financial markets. Excessive herding distorts rational decisions, amplifies volatility, and can be exploited by…
We consider a model of contagion in financial networks recently introduced in the literature, and we characterize the effect of a few features empirically observed in real networks on the stability of the system. Notably, we consider the…
We study a simple singular control problem for a Brownian motion with constant drift and variance reflected at the origin. Exerting control pushes the process towards the origin and generates a concave increasing state-dependent yield which…
There has been a growing interest in multi-agent simulators in the domain of economic modeling. However, contemporary research often involves developing reinforcement learning (RL) based models that focus solely on a single type of agents,…
This paper explores the interplay between transfer policies, R\&D, corruption, and economic development using a general equilibrium model with heterogeneous agents and a government. The government collects taxes, redistributes fiscal…
I introduce a new way of decomposing the evolution of the wealth distribution using a simple continuous time stochastic model, which separates the effects of mobility, savings, labor income, rates of return, demography, inheritance, and…
We study how governments promote social welfare through the design of contracting environments. We model the regulation of contracting as default delegation: the government chooses a delegation set of contract terms it is willing to…
In this paper, we study two optimisation settings for an insurance company, under the constraint that the terminal surplus at a deterministic and finite time $T$ follows a normal distribution with a given mean and a given variance. In both…
A decision maker (DM) has some funds invested through two investment firms. She wishes to allocate additional funds according to the firms' earnings. The DM, on the one hand, tries to maximize the total expected earnings, while the firms,…
Based on a point of view that solvency and security are first, this paper considers regular-singular stochastic optimal control problem of a large insurance company facing positive transaction cost asked by reinsurer under solvency…