Related papers: Risk Capacity and Optimal Monetary Policy
The classical Merton investment problem predicts deterministic, state-dependent portfolio rules; however, laboratory and field evidence suggests that individuals often prefer randomized decisions leading to stochastic and noisy choices.…
Decision maker's preferences are often captured by some choice functions which are used to rank prospects. In this paper, we consider ambiguity in choice functions over a multi-attribute prospect space. Our main result is a robust…
The optimal stopping problem for the risk process with interests rates and when claims are covered immediately is considered. An insurance company receives premiums and pays out claims which have occured according to a renewal process and…
We consider robust Markov Decision Processes with Borel state and action spaces, unbounded cost and finite time horizon. Our formulation leads to a Stackelberg game against nature. Under integrability, continuity and compactness assumptions…
This paper considers the problem faced by a bank which trades in the funds market so as to maintain the reserve requirements and minimize the costs of doing that. We work in a stochastic paradigm and the reserve requirements are determined…
We introduce the problem of assigning resources to improve their utilization. The motivation comes from settings where agents have uncertainty about their own values for using a resource, and where it is in the interest of a group that…
In risk-sharing markets with aggregate uncertainty, characterizing Pareto-optimal allocations when agents might not be risk averse is a challenging task, and the literature has only provided limited explicit results thus far. In particular,…
We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following a diffusion with stochastic volatility. In the current financial market especially, it is important to…
This paper devises a way to apply the Bank and El Karoui Representation Theorem to find the investment boundary of a rich stochastic, continuous time capacity expansion problem with irreversible investment on the finite time interval $[0,…
We introduce simple cost and risk proxy metrics that can be attached to Treasury issuance strategy to complement analysis of the resulting portfolio weighted-average maturity (WAM). These metrics are based on mapping issuance fractions to…
We consider the problem of designing policies for Markov decision processes (MDPs) with dynamic coherent risk objectives and constraints. We begin by formulating the problem in a Lagrangian framework. Under the assumption that the risk…
The maximum entropy principle advocates to evaluate events' probabilities using a distribution that maximizes entropy among those that satisfy certain expectations' constraints. Such principle can be generalized for arbitrary decision…
We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…
This paper studies the remote estimation of multiple Markov sources over a lossy and rate-constrained channel. Unlike most existing studies that treat all source states equally, we exploit the \emph{semantics of information} and consider…
In this article we study an optimal stopping/optimal control problem which models the decision facing a risk-averse agent over when to sell an asset. The market is incomplete so that the asset exposure cannot be hedged. In addition to the…
We consider a robust consumption-investment problem under CRRA and CARA utilities. The time-varying confidence sets are specified by $\Theta$, a correspondence from $[0,T]$ to the space of L\'{e}vy triplets, and describe priori information…
We consider a frictionless constant endowment economy based on Leeper (1991). In this economy, it is shown that, under an ad-hoc monetary rule and an ad-hoc fiscal rule, there are two equilibria. One has active monetary policy and passive…
This article develops the theory of risk budgeting portfolios, when we would like to impose weight constraints. It appears that the mathematical problem is more complex than the traditional risk budgeting problem. The formulation of the…
Markov Decision Processes (MDPs) offer a fairly generic and powerful framework to discuss the notion of optimal policies for dynamic systems, in particular when the dynamics are stochastic. However, computing the optimal policy of an MDP…
In this paper, we propose a model predictive control (MPC) method for real-time intervention of spreading processes, such as epidemics and wildfire, over large-scale networks. The goal is to allocate budgeted resources each time step to…