Showing 1 - 10 of 6,877
The paper solves a puzzle related to unsecured credit and the use of credit scores. With credit scores increasingly present in credit decisions, and with the increased use of credit cards, especially in categories at risk of large negative health shocks, asymmetry of information between banks...
Persistent link: https://www.econbiz.de/10013097729
We bring together the theories of duality and dynamic programming. We show that the dual of a separable dynamic optimization problem can be recursively decomposed. We provide a dual version of the principle of optimality and give conditions under which the dual Bellman operator is a contraction...
Persistent link: https://www.econbiz.de/10013008468
We propose a generic computational framework for solving large-scale infinite-horizon, discrete-time dynamic incentive problems with persistent hidden types. First, we combine set-valued dynamic programming techniques with unsupervised machine learning to determine irregularly-shaped feasible...
Persistent link: https://www.econbiz.de/10012850933
Previous literature documents that mutual funds' flows increase more than linearly with realized performance. I show this convex flow-performance relationship is consistent with a dynamic contracting model in which investors learn about the fund manager's skill. My model predicts that flows...
Persistent link: https://www.econbiz.de/10012860014
Outcomes of the shallow lake interest conflict are presented in a number of different contexts: quasi-static and dynamic social planning, and quasi-static one-shot and repeated non-cooperative play. As the underlying dynamics are non-convex, the analysis uses geometrical-numerical methods: the...
Persistent link: https://www.econbiz.de/10011378127
Epstein (1998) demonstrates that in the demographic Prisoner's Dilemma game it is possible to sustain cooperation in a repeated game played on a finite grid, where agents are spatially distributed and of fixed strategy type ('cooperate' or 'defect'). We introduce a methodology to formalize the...
Persistent link: https://www.econbiz.de/10009725483
We study option pricing and hedging with uncertainty about a Black-Scholes reference model which is dynamically recalibrated to the market price of a liquidly traded vanilla option. For dynamic trading in the underlying asset and this vanilla option, delta-vega hedging is asymptotically optimal...
Persistent link: https://www.econbiz.de/10011506357
Competition between political parties is a process that unfolds over time whereas formal theories of party competition have tended to take an essentially static, or one-shot, approach. This leaves some gaps in our understanding of the dynamics of campaigning. The aim of this paper is to make up...
Persistent link: https://www.econbiz.de/10003733875
The seminal work of Fudenberg and Tirole (1985) on how preemption erodes the value of an option to wait raises general questions about the relation between models in discrete and continuous time and thus about the interpretation of its central result, relying on an "infinitely fine grid". Here...
Persistent link: https://www.econbiz.de/10011449161
In this article we address the problem of finding feedback Nash equilibria for linear quadratic differential games defined on descriptor systems. First, we decouple the dynamic and algebraic parts of a descriptor system using canonical projectors. We discuss the effects of feedback on the...
Persistent link: https://www.econbiz.de/10013131491