Related papers: Correlation between Risk Aversion and Wealth distr…
Risk aversion and insurance are two prominent and interconnected concepts in economics and finance. To explore their fundamental connection, we introduce risk-insurance parity, which associates various classes of insurance contracts with…
The paper studies an oligopolistic equilibrium model of financial agents who aim to share their random endowments. The risk-sharing securities and their prices are endogenously determined as the outcome of a strategic game played among all…
We present an agent-based model of microscopic wealth exchange in a dynamic network to study the topological features associated with economic inequality. The model evolves through two alternating processes, the conservative exchange of…
This paper studies the income fluctuation problem with capital income risk (i.e., dispersion in the rate of return to wealth). Wealth returns and labor earnings are allowed to be serially correlated and mutually dependent. Rewards can be…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
We present an agent-based model of economic exchange in a society composed of two groups, representing two social groups and with different internal protection rules for the poor agents. The goal is to address the emerging wealth…
A dynamical model of capital exchange is introduced in which a specified amount of capital is exchanged between two individuals when they meet. The resulting time dependent wealth distributions are determined for a variety of exchange…
This article proposes a new class of risk-sharing rules by exploring the relationship between capital allocation and risk sharing. While the former is concerned with ex-ante allocating capitals to different lines of business within a…
We investigate the accumulated wealth distribution by adopting evolutionary games taking place on scale-free networks. The system self-organizes to a critical Pareto distribution (1897) of wealth $P(m)\sim m^{-(v+1)}$ with $1.6 < v <2.0$…
This study investigates the emergence of power-law and other concentrated distributions through a feedback loop model in crowd interactions. Agents act by their response functions to observations and external forces, while observations…
This study is a detailed analysis of Speculation Game, a minimal agent-based model of financial markets, in which the round-trip trading and the dynamic wealth evolution with variable trading volumes are implemented. Instead of herding…
Wealth inequality is an important matter for economic theory and policy. Ongoing debates have been discussing recent rise in wealth inequality in connection with recent development of active financial markets around the world. Existing…
We conduct a market experiment with human agents in order to explore the structure of transaction networks and to study the dynamics of wealth accumulation. The experiment is carried out on our platform for 97 days with 2,095 effective…
We consider the problem of finding Pareto-optimal allocations of risk among finitely many agents. The associated individual risk measures are law invariant, but with respect to agent-dependent and potentially heterogeneous reference…
The Pareto model is very popular in risk management, since simple analytical formulas can be derived for financial downside risk measures (Value-at-Risk, Expected Shortfall) or reinsurance premiums and related quantities (Large Claim Index,…
A new multivariate distribution possessing arbitrarily parametrized and positively dependent univariate Pareto margins is introduced. Unlike the probability law of Asimit et al. (2010) [Asimit, V., Furman, E. and Vernic, R. (2010) On a…
We point out some major drawbacks in random trading market models and propose a realistic modification which overcomes such drawbacks through `sensible trading'. We apply such trading policy in different situations: a) Agents with zero…
We consider the problem of optimal risk sharing in a pool of cooperative agents. We analyze the asymptotic behavior of the certainty equivalents and risk premia associated with the Pareto optimal risk sharing contract as the pool expands.…
We study the risk criterion for investments based on the drawdown from the maximal value of the capital in the past. Depending on investor's risk attitude, thus his risk exposure, we find that the distribution of these drawdowns follows a…
We present a model in which we investigate the structure and evolution of a random network that connects agents capable of exchanging wealth. Economic interactions between neighbors can occur only if the difference between their wealth is…