Regulating Financial Networks Under Uncertainty

Regulating Stock Externalities Under Uncertainty

Using a simple analytical model incorporating benefits of a stock, costs of adjusting the stock, and uncertainty in costs, we uncover several important principles governing the choice of price-based policies (e.g., taxes) relative to quantity-based policies (e.g., tradable permits) for controlling stock externalities. Applied to the problem of greenhouse gases and climate change, we find that a...

Monetary Policy under Financial Uncertainty ∗

This paper considers the role of monetary policy in mitigating the effects of financial crises. I suppose that the economy occasionally but infrequently experiences crises, where financial variables directly affect the broader real economy. I analyze the formulation of monetary policy under such financial uncertainty, where policymakers recognize the possibility of financial crises, which leads...

Regulating Nonlinear Environmental Systems under Knightian Uncertainty

Managing Financial Risk in Planning under Uncertainty

A methodology is presented to include financial risk management in the framework of two-stage stochastic programming for planning under uncertainty. A known probabilistic definition of financial risk is adapted to be used in this framework and its relation to downside risk is analyzed. Using these definitions, new two-stage stochastic programming models that manage financial risk are presented....

Behavioural Financial Decision Making Under Uncertainty

Ever since von Neumann and Morgenstern published the axiomisation of Expected Utility Theory, there have been a considerable amount of observations appeared in the literature violating the expected utility theory. To make decisions under uncertainty, people generally separate possible outcomes into gains and losses. They are risk averse for gains but risk seeking for losses with very large prob...