Related papers: Comonotonic improvement under feasibility constrai…
Adding a capacity constraint to a hidden-action principal-agent problem results in the same set of Pareto optimal contracts as the unconstrained problem where output is scaled down by a constant factor. This scaling factor is increasing in…
In high-risk environments, traditional indemnity insurance is often unaffordable or ineffective, despite its well-known optimality under expected utility. We compare excess-of-loss indemnity insurance with parametric insurance within a…
The aggregation of individual risks in large credit and insurance portfolios is guided by diversification and the law of large numbers, which formalizes the convergence of sample averages to their means. At the same time, regulatory capital…
I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…
Conformal risk control is an extension of conformal prediction for controlling risk functions beyond miscoverage. The original algorithm controls the expected value of a loss that is monotonic in a one-dimensional parameter. Here, we…
We study optimal proportional reinsurance and investment strategies for an insurance company which experiences both ordinary and catastrophic claims and wishes to maximize the expected exponential utility of its terminal wealth. We propose…
We consider optimal allocation problems with Conditional Value-At-Risk (CVaR) constraint. We prove, under very mild assumptions, the convergence of the Sample Average Approximation method (SAA) applied to this problem, and we also exhibit a…
We derive computationally tractable formulations of the robust counterparts of convex quadratic and conic quadratic constraints that are concave in matrix-valued uncertain parameters. We do this for a broad range of uncertainty sets. In…
Overconservatism has long been recognized as a major issue with robust optimization, despite its key advantages of tractability, performance guarantee, and limited information. To address this issue, a new criterion is proposed that can…
This paper examines optimal risk sharing for empirically realistic risk attitudes, providing results on Pareto optimality, competitive equilibria, utility frontiers, and the first and second theorems of welfare. Contrary to common…
In this paper, we develop a unified framework for studying constrained robust optimal control problems with adjustable uncertainty sets. In contrast to standard constrained robust optimal control problems with known uncertainty sets, we…
We study efficient risk sharing among risk-averse agents in an economy with a large, finite number of states. Following a random shock to an initial agreement, agents may renegotiate. If they require a minimal utility improvement to accept…
It is well-known that an $\mathbb{R}$-valued random vector $(X_1, X_2, \cdots, X_n)$ is comonotonic if and only if $(X_1, X_2, \cdots, X_n)$ and $(Q_1(U), Q_2(U),\cdots, Q_n(U))$ coincide \emph{in distribution}, for \emph{any} random…
Portfolio selection in the periodic investment of securities modeled by a multivariate Merton model with dependent jumps is considered. The optimization framework is designed to maximize expected terminal wealth when portfolio risk is…
Minimizing volatility and adjustment costs is of central importance in many economic environments, yet it is often complicated by evolving feasibility constraints. We study a decision maker who repeatedly selects an action from a…
We model the influence of sharing large exogeneous losses to the reinsurance market by a bipartite graph. Using Pareto-tailed claims and multivariate regular variation we obtain asymptotic results for the Value-at-Risk and the Conditional…
This paper is devoted to study the effects arising from imposing a value-at-risk (VaR) constraint in mean-variance portfolio selection problem for an investor who receives a stochastic cash flow which he/she must then invest in a…
We show that a wide class of risk-constrained nonconvex functional optimization problems exhibit strong duality, regardless of nonconvexity. We develop two novel results under distinct sets of assumptions, establishing strong duality over…
Robust and distributionally robust optimization are modeling paradigms for decision-making under uncertainty where the uncertain parameters are only known to reside in an uncertainty set or are governed by any probability distribution from…
The risk of financial positions is measured by the minimum amount of capital to raise and invest in eligible portfolios of traded assets in order to meet a prescribed acceptability constraint. We investigate nondegeneracy, finiteness and…