Category Archives: Working Papers

HJB Equations and Extensions of Classical Stochastic Control Theory

by Charafeddine Mouzouni These notes are a transcription of the course ”Equations de HJB et extensions de la théorie classique du contrôle stochastique”, given by P.-L. Lions at the Collège de France in 2016/2017. The course contains a few developments … Continue reading

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Volatility in electricity derivative markets: the Samuelson effect revisited

by Edouard Jaeck & Delphine Lautier This article proposes an empirical study of the Samuelson effect in electricity markets. Our motivations are twofold. First, although the literature largely assesses the decreasing pattern in the volatilities along the price curve in … Continue reading

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A Long-Term Mathematical Model for Mining Industries

by Yves Achdou, Pierre-Noel Giraud, Jean-Michel Lasry & Pierre-Louis Lions A parcimonious long term model is proposed for a mining industry. Knowing the dynamics of the global reserve, the strategy of each production unit consists of an optimal control problems … Continue reading

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Negotiated Red Zones Around Hazardous Plants

by Céline Grislain-Letrémy & Bertrand Villeneuve The industrialists are liable for any damage they cause to neighboring households. Consequently, households do not have to pay for the risk they create by locating in exposed areas. To contain their liabilities, the firm can … Continue reading

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Natural Disasters, Land-Use, and Insurance

by Céline Grislain-Letrémy & Bertrand Villeneuve This paper addresses the urbanization of areas exposed to natural disasters and studies its dependency on land-use and insurance policies. The risk-map paradox that we describe explains why an insurance system with simplistic maps … Continue reading

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Les communs numériques : éléments d’économie politique

par Henri Verdier & Charles Murciano  Cet article interroge l’actualité intellectuelle et légale des communs. Plus précisément, notre travail explore la notion de commun numérique (ou informationnel) et ses spécificités au regard du concept classique de communs en théorie économique. Les … Continue reading

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The digital commons: a political and economic game-changer

by Henri Verdier and Charles Murciano This paper addresses the current intellectual and legal status of the commons. Specifically, we explore the notion of the digital (or information) commons and its specificities with regard to the classic concept of the commons … Continue reading

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Resource Conservation Across Generations in a Ramsey-Chichilnisky Model

by Geir B. Asheim & Ivar Ekeland  The Chichilnisky criterion is an explicit social welfare function that satisfies compelling conditions of intergenerational equity. However, it is time inconsistent and has no optimal solution in the Ramsey model. By investigating stationary Markov equilibria in … Continue reading

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Optimal Pits and Optimal Transportation

by Ivar Ekeland and Maurice Queyranne In open pit mining, one must dig a pit, that is, excavate the upper layers of ground before reaching the ore. The walls of the pit must satisfy some mechanical constraints, in order not to … Continue reading

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Probabilistic Representation of a Class of Non Conservative Nonlinear Partial Differential Equations

by Anthony Lecavil, Nadia Oudjane & Francesco Russo We introduce a new class of nonlinear Stochastic Differential Equations in the sense of McKean, related to non conservative nonlinear Partial Differential equations (PDEs). We discuss existence and uniqueness pathwise and in law … Continue reading

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Information Flows across the Futures Term Structure: Evidence from Crude Oil Prices

by Delphine Lautier, Franck Raynaud & Michel A. Robe We apply the concepts of conditional entropy, information transfers and directed graphs to investigate empirically the propagation of price fluctuations across a futures term structure. We focus on price relationships for North … Continue reading

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Integration of commodity derivative markets: Has it gone too far?

by Delphine Lautier, Julien Ling and Franck Raynaud We examine the impact of two financial crises on commodity derivative markets: the subprime crisis and the bankruptcy of Lehman Brothers. These crises are “external” to the commodity markets because they occurred in … Continue reading

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Explicit investment rules with time-to-build and uncertainty

by René Aïd, Salvatore Federico, Huyên Pham & Bertrand Villeneuve We establish explicit socially optimal rules for an irreversible investment decision  with time-to-build and uncertainty. Assuming a price sensitive demand function  with a random intercept, we provide comparative statics and … Continue reading

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The Impact of Hazardous Industrial Facilities on Housing Prices: A Comparison of Parametric and Semiparametric Hedonic Price Models

by Céline Grislain-Letrémy & Arthur Katossky The willingness of households to pay for prevention against industrial risks can be revealed by real estate markets. By using very rich microdata, we study housing prices in the vicinity of hazardous industries near three … Continue reading

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La comptabilité des émissions de carbone par enjeux – Définition, justification et comparaison avec les modèles existants

by Antoine Rose Les initiatives de comptabilité des émissions de carbone se sont multipliées au cours des dernières années, à mesure que la problématique du changement climatique s’est imposée. Pour chaque agent économique, la problématique climatique se traduit par des … Continue reading

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Natural Disasters: Exposure and Underinsurance

by Céline Grislain-Letrémy Insurance coverage for natural disasters remains low in many exposed areas. A limited supply of insurance is commonly identified as a primary causal factor in this low insurance coverage. The French overseas departments provide a rare natural … Continue reading

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A new class of problems in the calculus of variations

by Ivar Ekeland, Yiming Long & Qinglong Zhou In economic theory, and in optimal control, it has been customary to discount future gains at a constant rate δ > 0 (…). That future gains should be discounted is well grounded … Continue reading

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Faisabilité de l’apprentissage des paramètres d’un algorithme de trading sur des données réelles

par Sophie Laruelle Considérons qu’un trader ou un algorithme de trading interagissant avec les marchés durant les enchères continues puisse être modélisé par une procédure itérative ajustant le prix auquel il poste ses ordres à un rythme donné, (Laruelle, Lehalle … Continue reading

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Efficiency of the Price Formation Process in Presence of High Frequency Participants: a Mean Field Game analysis

by Aimé Lachapelle, Jean-Michel Lasry, Charles-Albert Lehalle & Pierre-Louis Lions This paper deals with a stochastic order-driven market model with waiting costs, for order books with heterogeneous traders. Offer and demand of liquidity drive price formation and traders anticipate future … Continue reading

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Skin in the Game and Moral Hazard

by Gilles Chemla & Christopher A. Hennessy What determines equilibrium securitization levels, and should they be regulated? To address these questions we develop a model where originators can exert unobservable effort to increase asset quality, subsequently having private information regarding … Continue reading

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