Related papers: A Theory of Saving under Risk Preference Dynamics
We study finite-horizon budget allocation as a closed-loop economic control problem and evaluate receding-horizon Model Predictive Control (MPC) relative to reactive budgeting policies. Budgets are allocated periodically under execution…
Background: Any sample of individuals has its own, unique distribution of preferences for choices that they make. Discrete choice models try to capture these distributions. Mixed logits are by far the most commonly used choice model in…
Stochastic dominance serves as a general framework for modeling a broad spectrum of decision preferences under uncertainty, with risk aversion as one notable example, as it naturally captures the intrinsic structure of the underlying…
In this paper, we study the portfolio optimization problem with general utility functions and when the return and volatility of underlying asset are slowly varying. An asymptotic optimal strategy is provided within a specific class of…
An empirical analysis, suggested by optimal Merton dynamics, reveals some unexpected features of asset volumes. These features are connected to traders' belief and risk aversion. This paper proposes a trading strategy model in the optimal…
We study an optimal investment control problem for an insurance company. The surplus process follows the Cramer-Lundberg process with perturbation of a Brownian motion. The company can invest its surplus into a risk free asset and a…
Various multi-agent models of wealth distributions defined by microscopic laws regulating the trades, with or without a saving criterion, are reviewed. We discuss and clarify the equilibrium properties of the model with constant global…
The kinetic exchange model has gained popularity in the field of statistical mechanics for investigating wealth interaction. Traditionally, kinetic exchange models have been studied without considering preferential interactions. However, in…
This note describes sufficient conditions under which total-cost and average-cost Markov decision processes (MDPs) with general state and action spaces, and with weakly continuous transition probabilities, can be reduced to discounted MDPs.…
Cumulative prospect theory (CPT) is the first theory for decision-making under uncertainty that combines full theoretical soundness and empirically realistic features [P.P. Wakker - Prospect theory: For risk and ambiguity, Page 2]. While…
This paper investigates an optimal control problem for an adoption-opinion model that couples opinion dynamics with a compartmental adoption framework on a multilayer network to study the diffusion of sustainable behaviors. Adoption evolves…
We introduce an extension to Merton's famous continuous time model of optimal consumption and investment, in the spirit of previous works by Pliska and Ye, to allow for a wage earner to have a random lifetime and to use a portion of the…
In this paper, we present a robust adaptive model predictive control (MPC) scheme for linear systems subject to parametric uncertainty and additive disturbances. The proposed approach provides a computationally efficient formulation with…
This study develops an inverse portfolio optimization framework for recovering latent investor preferences including risk aversion, transaction cost sensitivity, and ESG orientation from observed portfolio allocations. Using controlled…
We establish an equivalence between two seemingly different theories: one is the traditional axiomatisation of incomplete preferences on horse lotteries based on the mixture independence axiom; the other is the theory of desirable gambles…
This paper studies an optimal control problem for an adoption-opinion model that couples innovation adoption with opinion formation on a multilayer network. Adoption spreads through social contagion and perceived benefits, while opinions…
Selective classification, in which models can abstain on uncertain predictions, is a natural approach to improving accuracy in settings where errors are costly but abstentions are manageable. In this paper, we find that while selective…
Risk aversion is a common behavior universal to humans and animals alike. Economists have traditionally defined risk preferences by the curvature of the utility function. Psychologists and behavioral economists also make use of concepts…
I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…
In this paper the effect of posibilistic or mixed background risk on the level of optimal prevention is studied. In the framework of five purely possibilistic or mixed models, necessary and sufficient conditions are found such that the…