Related papers: A Theory of Saving under Risk Preference Dynamics
We consider the optimal risk sharing problem with a continuum of agents, modeled via a non-atomic measure space. Individual preferences are not assumed to be convex. We show the multiplicity of agents induces the value function to be…
We consider the ideal-gas models of trading markets, where each agent is identified with a gas molecule and each trading as an elastic or money-conserving (two-body) collision. Unlike in the ideal gas, we introduce saving propensity…
This paper studies the role of households' heterogeneity in access to financial markets and the consumption of commodity goods in the transmission of foreign shocks. First, I use survey data from Uruguay to show that low income households…
This paper studies the portfolio optimization problem when the investor's utility is general and the return and volatility of the risky asset are fast mean-reverting, which are important to capture the fast-time scale in the modeling of…
Model Predictive Control (MPC) offers rigorous safety and performance guarantees but is computationally intensive. Approximate MPC (AMPC) aims to circumvent this drawback by learning a computationally cheaper surrogate policy. Common…
We show that under plausible levels of background risk, no theory of choice under risk -- such as expected utility theory, prospect theory, or rank dependent utility -- can simultaneously satisfy the following three economic postulates: (i)…
We study a problem of privacy-preserving mechanism design. A data collector wants to obtain data from individuals to perform some computations. To relieve the privacy threat to the contributors, the data collector adopts a…
In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…
This paper develops a method to use singles' data in a non-parametric revealed preference setting of collective household choice. We use it to test the controversial assumption of preference stability between singles and couples, without…
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant…
We introduce an infinite-horizon, continuous-time portfolio selection problem faced by an agent with periodic S-shaped preference and present bias. The inclusion of a quasi-hyperbolic discount function leads to time-inconsistency and we…
We investigate the macroeconomic consequences of narrow banking in the context of stock-flow consistent models. We begin with an extension of the Goodwin-Keen model incorporating time deposits, government bills, cash, and central bank…
Adaptive populations such as those in financial markets and distributed control can be modeled by the Minority Game. We consider how their dynamics depends on the agents' initial preferences of strategies, when the agents use linear or…
Stochastic dominance is a preference relation of uncertain prospect defined over a class of utility functions. While this utility class represents basic properties of risk aversion, it includes some extreme utility functions rarely…
This paper studies a central planner's decision making on behalf of a group of members with diverse discount rates. In the context of optimal stopping, we work with an aggregation preference to incorporate all discount rates via an attitude…
This paper characterizes the equilibrium in a continuous time financial market populated by heterogeneous agents who differ in their rate of relative risk aversion and face convex portfolio constraints. The model is studied in an…
We constructively prove the existence of time-discrete consumption processes for stochastic money accounts that fulfill a pre-specified positively homogeneous projection property (PHPP) and let the account always be positive and exactly…
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…
We establish structural properties of optimal stopping problems under time-consistent dynamic (coherent) risk measures, focusing on value function monotonicity and the existence of control limit (threshold) optimal policies. While such…
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…