Risk Aversion and Savings Behavior (with Antoine Bommier and Lionel Wilner). September 2023. [abs] [bib]

We document a negative relationship between lifetime savings and risk aversion. Our approach includes theory, simulation, and empirics (on HRS data).

@techreport{BLH:21,
author={Bommier, Antoine and LeGrand, François and Wilner, Lionel},
institution={ETH Zurich},
month={September},
title={Risk Aversion and Savings Behavior},
type={Working {P}aper},
year={2023}}

Redistribution and the Wage-Price Dynamics: Optimal Fiscal and Monetary Policy (with Xavier Ragot and Thomas Bourany). July 2023. [abs] [bib]

We identify the set of fiscal tools that optimally implements price-wage stability in a HANK with sticky wages and prices. We show that price-wage stability crucially depends on a specific fiscal instrument. We refer to this policy as a non-Keynesian stabilization policy.

@techreport{LRB:23,
author={LeGrand, François and Ragot, Xavier and Bourany, Thomas},
institution={SciencesPo},
month={July},
title={Redistribution and the Wage-Price Dynamics: Optimal Fiscal and Monetary Policy},
type={Working {P}aper},
year={2023}}

Should we Increase or Decrease Public Debt? Optimal Fiscal Policy with Heterogeneous Agents (with Xavier Ragot). April 2023. R&R at Journal of Political Economy. [abs] [bib]

We prove the existence of a Ramsey equilibrium with positive capital tax. We show that the optimal public debt response crucially depends on the persistence of the public spending shock.

@techreport{LR:22b,
author={LeGrand, François and Ragot, Xavier},
institution={SciencesPo},
month={April},
title={Should we Increase or Decrease Public Debt? Optimal Fiscal Policy with Heterogeneous Agents},
type={Working {P}aper},
year={2023}}

Should Monetary Policy Care About Redistribution? Optimal Fiscal and Monetary Policy with Heterogeneous Agents (with Alaïs Martin-Baillon and Xavier Ragot). GitHub. December 2022. Revisions requested at Review of Economic Studies. [abs] [bib]

We derive optimal monetary and fiscal policies in a HANK model. With taxes on capital and labor, there is no redistributive role for monetary policy. With missing capital tax, inflation still has a quantitative modest role.

@techreport{LMR:21,
author={LeGrand, François and Martin-Baillon, Alaïs and Ragot, Xavier},
institution={SciencesPo},
month={December},
title={Should Monetary Policy Care About Redistribution? Optimal Fiscal and Monetary Policy with Heterogeneous Agents},
type={Working {P}aper},
year={2022}}

Uncovering Asset Market Participation from Household Consumption and Income (with Veronika Czellar and René Garcia). Online Appendix. August 2022. R&R at Journal of Econometrics. [abs] [bib]

We uncover using an indirect inference method individual financial market participations from individual consumption data and asset prices. The estimated participations are very close to those reported in the Survey of Consumer Finances and proced to be relevant information for macro and asset pricing.

@techreport{CGL:21,
author={Czellar, Veronika and Garcia, René and LeGrand, François},
institution={emlyon business school},
month={August},
title={Uncovering Asset Market Participation from Household Consumption and Income},
type={Working {P}aper},
year={2022}}

Fintech Lending Under Austerity (with Yan Alperovych and Anantha Divakaruni). August 2022. [abs] [bib]

We document public welfare spending as an important growth driver of FinTech lending.

@techreport{ADL:22,
author={Alperovych, Yan and Divakaruni, Anantha and LeGrand, François},
institution={emlyon business school},
month={August},
title={Fintech Lending Under Austerity},
type={Working {P}aper},
year={2022}}

Recursive Preferences and the Value of Life. Theory and Application to Epidemics (with Antoine Bommier and Daniel Harenberg). Julia codes. July 2022. [abs] [bib]

We propose a recursive utility specification that can be used in lifecycle models. We present an application to epidemics: Covid-19 and the 1918 influenza.

@techreport{BLH:21,
author={Bommier, Antoine and LeGrand, François and Harenberg, Daniel},
institution={ETH Zurich},
month={July},
title={Recursive Preferences and the Value of Life. Theory and Application to Epidemics},
type={Working {P}aper},
year={2022}}

The Welfare of Nations: Do Social Preferences Matter for the Macroeconomy? (with Xavier Ragot and Diego Rodrigues). April 2022. [abs] [bib]

To distinguish between the role of preferences and technologies in the differences in fiscal systems among countries, we derive a methodology to identify the Social Welfare Function (SWF) of a government. The SWF mostly affects the optimal steady-state fiscal system and equilibrium inequality.

@techreport{BHLO:22,
author={LeGrand, François and Ragot, Xavier and Rodrigues, Diego},
institution={SciencesPo},
month={April},
title={The Welfare of Nations: Do Social Preferences Matter for the Macroeconomy?},
type={Working {P}aper},
year={2022}}

Recursive Preferences, the Value of Life, and Household Finance (with Antoine Bommier, Daniel Harenberg and Cormac O’Dea). March 2022. R&R at Management Science. [abs] [bib]

We analyze the role of risk aversion in a life cycle model featuring several risks. Risk aversion is shown to contribute to explain the annuity puzzle.

@techreport{BHLO:22,
author={Bommier, Antoine and Harenberg, Daniel and LeGrand, François and O’Dea, Cormac},
institution={ETH Zurich},
month={March},
title={Recursive Preferences, the Value of Life, and Household Finance},
type={Working {P}aper},
year={2022}}

The Variance Risk Premium in Crude Oil Futures Markets: Incorporating the OVX Time Series in a Stochastic Volatility Model (with Lorenz Schneider). January 2022. [abs] [bib]

We propose a stochastic volatility model for crude oil markets that features a regime-switching price of variance-risk. While preserving tractability, this model allows us to capture the episodes of negative and positive variance risk premium.

@techreport{LS:22,
author={LeGrand, François and Schneider, Lorenz},
institution={emlyon business school},
month={January},
title={The Variance Risk Premium in Crude Oil Futures Markets: Incorporating the OVX Time Series in a Stochastic Volatility Model},
type={Working {P}aper},
year={2022}}

Interest Rate and Existence of Stationary Equilibria in Incomplete Insurance-Market Economies (with Xavier Ragot). February 2020. [abs] [bib]

We present a truncation theory in the space of idiosyncratic histories for heterogeneous agent models. This allows us to solve for Ramsey programs. We study the optimal level of unemployment insurance.

@techreport{LR:20a,
author={LeGrand, François and Ragot, Xavier},
institution={SciencesPo},
month={February},
title={Interest Rate and Existence of Stationary Equilibria in Incomplete Insurance-Market Economies},
type={Working {P}aper},
year={2020}}

Optimal Policies with Heterogeneous Agents: Truncation and Transitions (with Xavier Ragot). Forthcoming in Journal of Economic Dynamics and Control. 2023. [abs] [bib] [pub]

We compute the Ramsey policies using the truncation method and compare its outcomes to those of other solution techniques. The truncation approach delivers quantitatively accurate estimates of actual optimal policies and we document the presence of a time-inconsistency problem specific to incomplete-market economies in Ramsey problems.

@article{LR:22a,
author={LeGrand, François and Ragot, Xavier},
journal={Journal of Economic Dynamics and Control},
month={},
pages={},
title={Optimal Policies with Heterogeneous Agents: Truncation and Transitions},
volume={Forthcoming},
year={2023}}

The Impact of Risk Aversion and Ambiguity Aversion on Annuity and Saving Choices (with Eric André and Antoine Bommier). Journal of Risk and Uncertainty, Vol. 65, August 2022, pp. 33-56. [abs] [bib] [pub]

In a lifecycle recursive utility model, risk and ambiguity aversion are shown to reduce annuity demand and enhance bond holdings.

@article{ABL:21,
author={André, Eric and Bommier, Antoine and LeGrand, François},
journal={Journal of Risk and Uncertainty},
month={August},
pages={33-56},
title={The Impact of Risk Aversion and Ambiguity Aversion on Annuity and Saving Choices},
volume={65},
year={2022}}

Refining the Truncation Method to Solve Heterogeneous-Agent Models (with Xavier Ragot). Annals of Economics and Statistics, Vol. 146, June 2022, pp. 65-91. [abs] [bib] [pub]

We present a refinement of truncation method that allows one to consider history sizes of different length. The refined truncation improves the accuracy of the uniform truncation.

@article{LR:22,
author={LeGrand, François and Ragot, Xavier},
journal={Annals of Economics and Statistics},
month={June},
pages={65-91},
title={Refining the Truncation Method to Solve Heterogeneous-Agent Models},
volume={146},
year={2022}}

Managing Inequality over Business Cycles: Optimal Policies with Heterogeneous Agents and Aggregate Shocks (with Xavier Ragot). International Economic Review, Vol. 63(1), February 2022, pp. 511-540. [abs] [bib] [pub]

We present a truncation theory in the space of idiosyncratic histories for heterogeneous agent models. This allows us to solve for Ramsey programs. We study the optimal level of unemployment insurance along the business cycle.

@article{LR:21b,
author={LeGrand, François and Ragot, Xavier},
journal={International Economic Review},
month={February},
number={1},
pages={511-540},
title={Managing Inequality over Business Cycles: Optimal Policies with Heterogeneous Agents and Aggregate Shocks},
volume={63},
year={2022}}

Sovereign Default and Liquidity: The Case for a World Safe Asset (with Xavier Ragot). Journal of International Economics, Vol. 131, July 2021, pp. 103462. [abs] [bib] [pub]

We provide a tractable framework featuring endogenous default and incomplete market, where the equilibrium can be fully analyzed. A world fund is shown to be able to improve aggregate welfare.

@article{LR:21,
author={LeGrand, François and Ragot, Xavier},
journal={Journal of International Economics},
month={July},
pages={103462},
title={Sovereign Default and Liquidity: The Case for a World Safe Asset},
volume={131},
year={2021}}

Defaulting Firms and Systemic Risks in Financial Networks: A Normative Approach (with Nicolas Houy and Frédéric Jouneau-Sion). Economic Theory, Vol. 70, July 2020, pp. 503-526. [abs] [bib] [pub]

We study systemic risk in an interbank market, employing an explicit axiomatization inspired by Eisenberg and Noe (2001) and Rogers and Veraart (2013). We characterize the smallest (in the sense of inclusion) set of ex-post defaulting firms.

@article{HJL:20,
author={Houy, Nicolas and Jouneau-Sion, Frédéric and LeGrand, François},
journal={Economic Theory},
month={July},
pages={503-526},
title={Defaulting Firms and Systemic Risks in Financial Networks: A Normative Approach},
volume={70},
year={2020}}

Optimizing Treatment Combination for Lymphoma Using an Optimization Heuristic (with Nicolas Houy). Mathematical Biosciences, Vol. 315, September 2019, pp. 108227. [abs] [bib] [pub]

The standard treatment for high-grade non-Hodgkin lymphoma involves the combination of chemotherapy and immunotherapy. We characterize in-silico the optimal combination protocol that maximizes the overall survival probability.

@article{HLb:19,
author={Houy, Nicolas and LeGrand, François},
journal={Mathematical Biosciences},
month={September},
pages={108227},
title={Optimizing Treatment Combination for Lymphoma Using an Optimization Heuristic},
volume={315},
year={2019}}

Ambiguity and Endogenous Discounting? (with Antoine Bommier and Asen Kochov). Journal of Mathematical Economics, Vol. 83, August 2019, pp. 48-62. [abs] [bib] [pub]

We provide an intertemporal behavior criterion that helps discriminate between dynamic models of ambiguity aversion and expected utility models with endogenous discounting.

@article{BKL:19,
author={Bommier, Antoine and Kochov, Asen and LeGrand, François},
journal={Journal of Mathematical Economics},
month={August},
pages={48-62},
title={Ambiguity and Endogenous Discounting?},
volume={83},
year={2019}}

Personalized Oncology with Artificial Intelligence: The Case of Temozolomide (with Nicolas Houy). Artificial Intelligence in Medicine, Vol. 99, August 2019, pp. 101693. [abs] [bib] [pub]

We compute optimal personalized protocols using AI techniques. We quantify in-silico the benefits offered by personalized oncology in the case of temozolomide administration.

@article{HLc:19,
author={Houy, Nicolas and LeGrand, François},
journal={Artificial Intelligence in Medicine},
month={August},
pages={101693},
title={Personalized Oncology with Artificial Intelligence: The Case of Temozolomide},
volume={99},
year={2019}}

Perron-Frobenius Theory Recovers More Than What You Might Think: The Example of Limited Participation. Economics Letters, Vol. 174, January 2019, pp. 186-188. [abs] [bib] [pub]

We provide an example economy where Perron-Frobenius theory can help recover determinants of market segmentation.

@article{L:19,
author={LeGrand, François},
journal={Economics Letters},
month={January},
pages={186-188},
title={Perron-Frobenius Theory Recovers More Than What You Might Think: The Example of Limited Participation},
volume={174},
year={2019}}

Risk Aversion and Precautionary Savings in Dynamic Settings (with Antoine Bommier). Fortran codes. Management Science, Vol. 65(3), March 2019, pp. 1386-1397. [abs] [bib] [pub]

In a very general infinite-horizon setting, precautionary savings are proved to covary positively with risk aversion, whenever preferences are monotone and the income process is stochastically monotone.

@article{BL:19,
author={Bommier, Antoine and LeGrand, François},
journal={Management Science},
month={March},
number={3},
pages={1386-1397},
title={Risk Aversion and Precautionary Savings in Dynamic Settings},
volume={65},
year={2019}}

Optimizing Immune Cell Therapies with Artificial Intelligence (with Nicolas Houy). Journal of Theoretical Biology, Vol. 461, January 2019, pp. 34-40. [abs] [bib] [pub]

We propose a methodology borrowed from IA to optimize the administration of anti-VEGF and unlicensed dendritic cells. We show that optimized protocols enable to significantly reduce total drug use.

@article{HL:19,
author={Houy, Nicolas and LeGrand, François},
journal={Journal of Theoretical Biology},
month={January},
pages={34-40},
title={Optimizing Immune Cell Therapies with Artificial Intelligence},
volume={461},
year={2019}}

Optimal Dynamic Regimens with Artificial Intelligence: The Case of Temozolomide (with Nicolas Houy). PLoS ONE, Vol. 13(6), June 2018, pp. e0199076. [abs] [bib] [pub]

We use artificial intelligence to determine an optimal protocol in a heterogeneous population. Compared to conventional protocol, our solution achieves a sizable reduction in tumor size for a similar toxicity.

@article{HL:18b,
author={Houy, Nicolas and LeGrand, François},
journal={PLoS ONE},
month={June},
number={6},
pages={e0199076},
title={Optimal Dynamic Regimens with Artificial Intelligence: The Case of Temozolomide},
volume={13},
year={2018}}

Administration of Temozolomide: Comparison of Conventional and Metronomic Chemotherapy Regimens (with Nicolas Houy). Journal of Theoretical Biology, Vol. 446, June 2018, pp. 71-78. [abs] [bib] [pub]

We propose an innovative methodology for characterizing optimal chemotherapy protocols. We discuss the optimality of conventional and metronomic regimens.

@article{HL:18a,
author={Houy, Nicolas and LeGrand, François},
journal={Journal of Theoretical Biology},
month={June},
pages={71-78},
title={Administration of Temozolomide: Comparison of Conventional and Metronomic Chemotherapy Regimens},
volume={446},
year={2018}}

A Class of Tractable Incomplete-Market Models for Studying Asset Returns and Risk Exposure (with Xavier Ragot). European Economic Review, Vol. 103, April 2018, pp. 39-59. [abs] [bib] [pub]

We propose class of tractable incomplete-market models, with aggregate risk and financial participation costs, that enables to quantitatively reproduce US asset price properties and the risk exposure of US households.

@article{LR:18,
author={LeGrand, François and Ragot, Xavier},
journal={European Economic Review},
month={April},
pages={39-59},
title={A Class of Tractable Incomplete-Market Models for Studying Asset Returns and Risk Exposure},
volume={103},
year={2018}}

On Monotone Recursive Preferences (with Antoine Bommier and Asen Kochov). Econometrica, Vol. 85(5), September 2017, pp. 1433-1466. [abs] [bib] [pub]

We prove that risk-sensitive preferences are the only preferences to be monotone and to disentangle risk aversion and elasticity of substitution.

@article{BoKoLe:17,
author={Bommier, Antoine and Kochov, Asen and LeGrand, François},
journal={Econometrica},
month={September},
number={5},
pages={1433-1466},
title={On Monotone Recursive Preferences},
volume={85},
year={2017}}

Existence of Equilibria in Exhaustible Resource Markets with Economies of Scale and Inventories (with Antoine Bommier and Lucas Bretschger). Economic Theory, Vol. 63(3), March 2017, pp. 687-721. [abs] [bib] [pub]

We prove the existence of equilibrium in nonrenewable resource markets when extraction costs are non-convex and resource storage is possible.

@article{BBL:17,
author={Bommier, Antoine and Bretschger, Lucas and LeGrand, François},
journal={Economic Theory},
month={March},
number={3},
pages={687-721},
title={Existence of Equilibria in Exhaustible Resource Markets with Economies of Scale and Inventories},
volume={63},
year={2017}}

Incomplete Markets and Derivative Assets (with Xavier Ragot). Economic Theory, Vol. 62(3), August 2016, pp. 517-545. [abs] [bib] [pub]

In an incomplete market economy with aggregate risk, option trading and option prices are driven by heterogeneous uninsurable risks.

@article{LR:16,
author={LeGrand, François and Ragot, Xavier},
journal={Economic Theory},
month={August},
number={3},
pages={517-545},
title={Incomplete Markets and Derivative Assets},
volume={62},
year={2016}}

Too Risk Averse to Purchase Insurance? A Theoretical Glance at the Annuity Puzzle (with Antoine Bommier). Journal of Risk and Uncertainty, Vol. 48(2), April 2014, pp. 135-166. [abs] [bib] [pub]

In a life-cycle model, risk aversion is found to decrease the demand for annuities: Risk attitudes may then contribute to explain the “annuity puzzle”.

@article{BL:14,
author={Bommier, Antoine and LeGrand, François},
journal={Journal of Risk and Uncertainty},
month={April},
number={2},
pages={135-166},
title={Too Risk Averse to Purchase Insurance? A Theoretical Glance at the Annuity Puzzle},
volume={48},
year={2014}}

Incomplete Markets, Liquidation Risk and the Term Structure of Interest Rates (with Edouard Challe and Xavier Ragot). Technical Appendix. Journal of Economic Theory, Vol. 148(6), November 2013, pp. 2483-2519. [abs] [bib] [pub]

In an incomplete market economy with aggregate risk, a larger bond volume is found to increase both the level and the slope of the term structure of interest rates.

@article{CLR:13,
author={Challe, Edouard and LeGrand, François and Ragot, Xavier},
journal={Journal of Economic Theory},
month={November},
number={6},
pages={2483-2519},
title={Incomplete Markets, Liquidation Risk and the Term Structure of Interest Rates},
volume={148},
year={2013}}

Comparative Risk Aversion: A Formal Approach with Applications to Saving Behaviors (with Antoine Bommier and Arnold Chassagnon). Journal of Economic Theory, Vol. 147(4), July 2012, pp. 1614-1641. [abs] [bib] [pub]

In a model-free framework, risk aversion is found to have an intuitive impact. The more risk averse the agent, the closer her behaviour to the one in a bad state.

@article{BCL:12,
author={Bommier, Antoine and Chassagnon, Arnold and LeGrand, François},
journal={Journal of Economic Theory},
month={July},
number={4},
pages={1614-1641},
title={Comparative Risk Aversion: A Formal Approach with Applications to Saving Behaviors},
volume={147},
year={2012}}

Recursive Preferences and the Value of Life: A Clarification (with Antoine Bommier and Daniel Harenberg). January 2021. [abs] [bib]

We discuss and propose recursive utility specifications that can be used to properly study the value of life.

@techreport{BHL:21,
author={Bommier, Antoine and Harenberg, Daniel and LeGrand, François},
institution={ETH Zurich},
month={January},
title={Recursive Preferences and the Value of Life: A Clarification},
type={Working {P}aper},
year={2021}}

A Robust Approach to Risk Aversion (with Antoine Bommier). September 2014. [abs] [bib]

We show that the only Kreps and Porteus (1978) preferences which are both stationary and monotone are Uzawa preferences and risk-sensitive preferences. We also extend our results to smooth recursive ambiguity models à la Hayashi and Miao (2011).

@techreport{BL:14,
author={Bommier, Antoine and LeGrand, François},
institution={ETH Zurich},
month={September},
title={A Robust Approach to Risk Aversion},
year={2014}}

Nelson and Siegel, No-Arbitrage and Risk Premium. February 2008. [abs] [bib]

We quantify the impacts of imposing no-arbitrage restrictions to a Nelson and Siegel model.

@techreport{L:08,
author={LeGrand, François},
institution={Paris School of Economics},
month={February},
title={Nelson and Siegel, No-Arbitrage and Risk Premium},
type={Working {P}aper},
year={2008}}