Related papers: Utility-Invariant Support Selection and Eventwise …
We consider the problem of maximizing expected utility from terminal wealth in models with stochastic factors. Using martingale methods and a conditioning argument, we determine the optimal strategy for power utility under the assumption…
In repeated-game applications where both the collusive and non-collusive outcomes can be supported as equilibria, researchers must resolve underlying selection questions if theory will be used to understand counterfactual policies. One…
A fundamental tool in network information theory is the covering lemma, which lower bounds the probability that there exists a pair of random variables, among a give number of independently generated candidates, falling within a given set.…
We establish fundamental connections between utility theories of wealth from the economic sciences and information-theoretic quantities. In particular, we introduce operational tasks based on betting where both gambler and bookmaker have…
Sequential auctions for identical items with unit-demand, private-value buyers are common and often occur periodically without end, as new bidders replace departing ones. We model bidder uncertainty by introducing a probability that a…
Cooperation in heterogeneous groups, where individuals differ in resources, productivity, and behavioural responsiveness, underpins collective action across many social and biological systems. Introspection dynamics, in which each player…
This paper establishes a link between endowments, patience types, and the parameters of the HARA Bernoulli utility function that ensure equilibrium uniqueness in an economy with two goods and two impatience types with additive separable…
This paper studies an incentive structure for cooperation and its stability in peer-assisted services when there exist multiple content providers, using a coalition game theoretic approach. We first consider a generalized coalition…
We combine forward investment performance processes and ambiguity averse portfolio selection. We introduce the notion of robust forward criteria which addresses the issues of ambiguity in model specification and in preferences and…
We determine the variance-optimal hedge when the logarithm of the underlying price follows a process with stationary independent increments in discrete or continuous time. Although the general solution to this problem is known as backward…
The evaluation of the probability of union of a large number of independent events requires several combinations involving the factorial and the use of high performance computers with several hours of processing. Bounds and simplifications…
When quoting across multiple contracts, the sequence of execution can be a key driver of implementation shortfall relative to the target spread~\cite{bergault2022multi}. We model the short-horizon execution risk from such quoting as…
By embedding uncertainty into time, we obtain a conjoint axiomatic characterization of both Exponential Discounting and Subjective Expected Utility that accommodates arbitrary state and outcome spaces. In doing so, we provide a novel and…
In intertemporal settings, the multiattribute utility theory of Kihlstrom and Mirman suggests the application of a concave transform of the lifetime utility index. This construction, while allowing time and risk attitudes to be separated,…
This paper studies a one-sector optimal growth model with i.i.d. productivity shocks that are allowed to be unbounded. The utility function is assumed to be non-negative and unbounded from above. The novel feature in our framework is that…
Managing unemployment is one of the key issues in social policies. Unemployment insurance schemes are designed to cushion the financial and morale blow of loss of job but also to encourage the unemployed to seek new jobs more pro-actively…
The von Neumann-Morgenstern (VNM) utility theorem shows that under certain axioms of rationality, decision-making is reduced to maximizing the expectation of some utility function. We extend these axioms to increasingly structured…
We study a general class of consumption-savings problems with recursive preferences. We characterize the sign of the consumption response to arbitrary shocks in terms of the product of two sufficient statistics: the elasticity of…
This paper studies the continuous time utility maximization problem on consumption with addictive habit formation in incomplete semimartingale markets. Introducing the set of auxiliary state processes and the modified dual space, we embed…
We consider the pricing and hedging of exotic options in a model-independent set-up using \emph{shortfall risk and quantiles}. We assume that the marginal distributions at certain times are given. This is tantamount to calibrating the model…