Related papers: Correlation between Risk Aversion and Wealth distr…
In this paper we show similarities between turbulence and financial systems. Motivated by similarities between the two systems, we construct a multiscale model for hierarchical financial structures that exhibits a constant cascade of wealth…
We study the optimal decisions and equilibria of agents who aim to minimize their risks by allocating their positions over extremely heavy-tailed (i.e., infinite-mean) and possibly dependent losses. The loss distributions of our focus are…
We study the problem of allocating $m$ indivisible items to $n$ agents with additive utilities. It is desirable for the allocation to be both fair and efficient, which we formalize through the notions of envy-freeness and Pareto-optimality.…
A dynamic agent model is introduced with an annual random wealth multiplicative process followed by taxes paid according to a linear wealth-dependent tax rate. If poor agents pay higher tax rates than rich agents, eventually all wealth…
We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…
Strategies aimed at reducing the negative effects of long-term uncertainty and risk are common in biology, game theory, and finance, even if they entail a cost in terms of mean benefit. Here, we focus on the single mutant's invasion of a…
The standard asset pricing models (the CCAPM and the Epstein-Zin non-expected utility model) counterintuitively predict that equilibrium asset prices can rise if the representative agent's risk aversion increases. If the income effect,…
We consider a simple theoretical model to investigate the impact of inheritances on the wealth distribution. Wealth is described as a finite resource, which remains constant over different generations and is divided equally among offspring.…
In this paper, we introduce a large system of interacting financial agents in which each agent is faced with the decision of how to allocate his capital between a risky stock or a risk-less bond. The investment decision of investors,…
Public Goods Games represent one of the most useful tools to study group interactions between individuals. However, even if they could provide an explanation for the emergence and stability of cooperation in modern societies, they are not…
We propose a novel approach to infer investors' risk preferences from their portfolio choices, and then use the implied risk preferences to measure the efficiency of investment portfolios. We analyze a dataset spanning a period of six…
We address the problem of sharing risk among agents with preferences modelled by a general class of comonotonic additive and law-based functionals that need not be either monotone or convex. Such functionals are called distortion…
In behavioral finance, aversion affects investors' judgment of future uncertainty when profit and loss occur. Considering investors' aversion to loss and risk, and the ambiguous uncertainty characterizing asset returns, we construct a…
New versions of the set-valued average value at risk for multivariate risks are introduced by generalizing the well-known certainty equivalent representation to the set-valued case. The first "regulator" version is independent from any…
We find the perhaps surprising inequality that the weighted average of independent and identically distributed Pareto random variables with infinite mean is larger than one such random variable in the sense of first-order stochastic…
This paper considers a newly delayed reinsurance and investment optimization problem incorporating random risk aversion, in which an insurer pursues maximization of the expected certainty equivalent of her/his terminal wealth and the…
In simulations of some economic gas-like models, the asymptotic regime shows an exponential wealth distribution, independently of the initial wealth distribution given to the system. The appearance of this statistical equilibrium for this…
While wealth distribution in the world is highly skewed and heavy-tailed, human talent - as the majority of individual features - is normally distributed. In a recent computational study by Pluchino et al [Talent vs luck: The role of…
We analyze wealth condensation for a wide class of stochastic economy models on the basis of the economic analog of thermodynamic potentials, termed transfer potentials. The economy model is based on three common transfers modes of wealth:…
We introduce a way to compare actions in decision problems. One action is safer than another if the set of beliefs at which the decision-maker prefers the safer action expands as the decision-maker becomes more risk averse. We provide a…