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The increasing penetration of renewable energy poses significant challenges to power grid reliability. There have been increasing interests in utilizing financial tools, such as insurance, to help end-users hedge the potential risk of lost…
The use of models, even if efficient, must be accompanied by an understanding at all levels of the process that transforms data (upstream and downstream). Thus, needs increase to define the relationships between individual data and the…
In many choice problems, the interaction between several distinct variables determines the payoff of each alternative. I propose and axiomatize a model of a decision maker who recognizes that she may not accurately perceive the correlation…
We consider the problem of an agent who faces losses in continuous time over a finite time horizon and may choose to share some of these losses with a counterparty. The agent is uncertain about the true loss distribution and has multiple…
This paper investigates a hybrid stochastic differential reinsurance and investment game between one reinsurer and two insurers, including a stochastic Stackelberg differential subgame and a non-zero-sum stochastic differential subgame. The…
We study the implicit bias of optimization in robust empirical risk minimization (robust ERM) and its connection with robust generalization. In classification settings under adversarial perturbations with linear models, we study what type…
In this paper we investigate the hedging problem of a unit-linked life insurance contract via the local risk-minimization approach, when the insurer has a restricted information on the market. In particular, we consider an endowment…
The instability of historical risk factor correlations renders their use in estimating portfolio risk extremely questionable. In periods of market stress correlations of risk factors have a tendency to quickly go well beyond estimated…
I introduce novel preference formulations which capture aversion to ambiguity about unknown and potentially time-varying volatility. I compare these preferences with Gilboa and Schmeidler's maxmin expected utility as well as variational…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
We study how loyalty behavior of customers and differing costs to produce undifferentiated products by firms can influence market outcomes. In prior works that study such markets, firm costs have generally been assumed negligible or equal,…
We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…
This paper revisits the classic instrument choice problem in a setting with consumption externalities, through the lens of robust mechanism design. A regulator can implement any incentive-compatible policy but is uncertain about how…
We introduce a two-agent problem which is inspired by price asymmetry arising from funding difference. When two parties have different funding rates, the two parties deduce different fair prices for derivative contracts even under the same…
Limited liability creates a conflict of interests between policyholders and shareholders of insurance companies. It provides shareholders with incentives to increase the risk of the insurer's assets and liabilities which, in turn, might…
The development of Machine Learning is experiencing growing interest from the general public, and in recent years there have been numerous press articles questioning its objectivity: racism, sexism, \dots Driven by the growing attention of…
Actuaries use predictive modeling techniques to assess the loss cost on a contract as a function of observable risk characteristics. State-of-the-art statistical and machine learning methods are not well equipped to handle hierarchically…
We introduce a strategic behavior in reinsurance bilateral transactions, where agents choose the risk preferences they will appear to have in the transaction. Within a wide class of risk measures, we identify agents' strategic choices to a…
We study an optimal dividend problem for an insurer who simultaneously controls investment weights in a financial market, liability ratio in the insurance business, and dividend payout rate. The insurer seeks an optimal strategy to maximize…
Consumers in many markets are uncertain about firms' qualities and costs, so buy based on both the price and the quality inferred from it. Optimal pricing depends on consumer heterogeneity only when firms with higher quality have higher…