Related papers: Risk Capacity and Optimal Monetary Policy
In our previous paper, "A Unified Approach to Systemic Risk Measures via Acceptance Set" (\textit{Mathematical Finance, 2018}), we have introduced a general class of systemic risk measures that allow for random allocations to individual…
Economic Model Predictive Control (MPC) dissipativity theory is central to discussing the stability of policies resulting from minimizing economic stage costs. In its current form, the dissipativity theory for economic MPC applies to…
We propose a consumption-investment decision model where past consumption peak $h$ plays a crucial role. There are two important consumption levels: the lowest constrained level and a reference level, at which the risk aversion in terms of…
We study risk-aware linear policy approximations for the optimal operation of an energy system with stochastic wind power, storage, and limited fuel. The resulting problem is a sequential decision-making problem with rolling forecasts. In…
In this paper we consider reinsurance or risk sharing from a macroeconomic point of view. Our aim is to find socially optimal reinsurance treaties. In our setting we assume that there are $n$ insurance companies each bearing a certain risk…
I study the optimal regulation of a financial sector where individual banks face self-enforcing constraints countering their default incentives. The constrained-efficient social planner can improve over the unregulated equilibrium in two…
The ongoing concern about systemic risk since the outburst of the global financial crisis has highlighted the need for risk measures at the level of sets of interconnected financial components, such as portfolios, institutions or members of…
We consider risk-sensitive Markov decision processes (MDPs), where the MDP model is influenced by a parameter which takes values in a compact metric space. We identify sufficient conditions under which small perturbations in the model…
We consider settings in which the distribution of a multivariate random variable is partly ambiguous. We assume the ambiguity lies on the level of the dependence structure, and that the marginal distributions are known. Furthermore, a…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
We study mean-risk optimal portfolio problems where risk is measured by Recovery Average Value at Risk, a prominent example in the class of recovery risk measures. We establish existence results in the situation where the joint distribution…
Risk management often plays an important role in decision making under uncertainty. In quantitative risk management, assessing and optimizing risk metrics requires efficient computing techniques and reliable theoretical guarantees. In this…
We study an optimal investment problem under default risk where related information such as loss or recovery at default is considered as an exogenous random mark added at default time. Two types of agents who have different levels of…
Problem definition: Traditional monopoly pricing assumes sellers have full information about consumer valuations. We consider monopoly pricing under limited information, where a seller only knows the mean, variance and support of the…
This paper considers the problem of optimal liquidation of a position in a risky security in a financial market, where price evolution are risky and trades have an impact on price as well as uncertainty in the filling orders. The problem is…
Many real-world human behaviors can be characterized as a sequential decision making processes, such as urban travelers choices of transport modes and routes (Wu et al. 2017). Differing from choices controlled by machines, which in general…
This paper studies the problem of optimal investment with CRRA (constant, relative risk aversion) preferences, subject to dynamic risk constraints on trading strategies. The market model considered is continuous in time and incomplete. the…
This paper studies the robust optimal gain selection problem for financial trading systems, formulated within a \emph{double linear policy} framework, which allocates capital across long and short positions. The key objective is to…
We consider a risk-averse stochastic capacity planning problem under uncertain demand in each period. Using a scenario tree representation of the uncertainty, we formulate a multistage stochastic integer program to adjust the capacity…
In this paper, we study the robust optimal investment and risk control problem for an insurer who owns the insider information about the financial market and the insurance market under model uncertainty. Both financial risky asset process…