Related papers: On decomposing risk in a financial-intermediate ma…
We propose a method to assess the intrinsic risk carried by a financial position $X$ when the agent faces uncertainty about the pricing rule assigning its present value. Our approach is inspired by a new interpretation of the quasiconvex…
We consider design of monetary mechanisms for two-sided matching. Mechanisms in the tradition of the deferred acceptance algorithm, even in variants incorporating money, tend to focus on the criterion of stability. Instead, in this work we…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…
We review the "production approach" to estimating markups, the ratio of price to marginal cost. The approach is uniquely scalable: it requires no model of consumer demand or market structure and applies broadly across firms, industries, and…
The left tail of the implied volatility skew, coming from quotes on out-of-the-money put options, can be thought to reflect the market's assessment of the risk of a huge drop in stock prices. We analyze how this market information can be…
The paper develops a decentralized resource allocation mechanism for allocating divisible goods with capacity constraints to non-price-taking agents with general concave utilities. The proposed mechanism is always budget balanced,…
This paper develops a new methodology for studying continuous-time Nash equilibrium in a financial market with asymmetrically informed agents. This approach allows us to lift the restriction of risk neutrality imposed on market makers by…
Financial institutions and insurance companies that analyze the evolution and sources of profits and losses often look at risk factors only at discrete reporting dates, ignoring the detailed paths. Continuous-time decompositions avoid this…
This paper investigates risk measures derived from the expected maximum deficit in a continuous-time framework and develops optimal reserve allocation strategies across multiple lines of business. We formalize the expected maximum deficit…
This paper studies Markov perfect equilibria in a repeated duopoly model where sellers choose algorithms. An algorithm is a mapping from the competitor's price to own price. Once set, algorithms respond quickly. Customers arrive randomly…
In this note we consider a system of financial institutions and study systemic risk measures in the presence of a financial market and in a robust setting, namely, where no reference probability is assigned. We obtain a dual representation…
In this paper we propose a novel Bayesian methodology for Value-at-Risk computation based on parametric Product Partition Models. Value-at-Risk is a standard tool to measure and control the market risk of an asset or a portfolio, and it is…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
In this paper, we study a time-inconsistent consumption-investment problem with random endowments in a possibly incomplete market under general discount functions. We provide a necessary condition and a verification theorem for an open-loop…
Correlations among stock returns during volatile markets differ substantially compared to those from quieter markets. During times of financial crisis, it has been observed that traditional dependency in global markets breaks down. However,…
We study overpricing in a repeated game between two representative agents: a market maker, who controls market liquidity, and a market taker, who chooses trade quantities. Market prices evolve through the endogenous price impact of trades…
In this paper we study the effect of network structure between agents and objects on measures for systemic risk. We model the influence of sharing large exogeneous losses to the financial or (re)insuance market by a bipartite graph. Using…
One of the most challenging aspects in the analysis and modelling of financial markets, including Credit Default Swap (CDS) markets, is the presence of an emergent, intermediate level of structure standing in between the microscopic…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
The Markowitz problem consists of finding in a financial market a self-financing trading strategy whose final wealth has maximal mean and minimal variance. We study this in continuous time in a general semimartingale model and under cone…