On May 11, 2026, we held the fifth session of our monthly FOR 5583 online seminar series “Asset Allocation and Asset Pricing under Regulatory Uncertainty”. This month’s seminar focused on how firms make investment decisions when taxation is uncertain and regulatory solvency requirements must be taken into account.

Gereon Seifert presented joint work with Nicole Bäuerle, An Chen, and Caren Sureth-Sloane, titled “Risk-constrained investment problems under tax uncertainty”.

The talk developed a continuous-time investment problem in which a firm faces financial market risk, tax-rate uncertainty, audit uncertainty, asymmetric treatment of gains and losses, and a solvency-type regulatory constraint. Within a Black–Scholes framework, the analysis compares the firm’s optimal strategy when it remains exposed to tax uncertainty with the case in which this uncertainty can be removed through an Advanced Tax Ruling.

One key message was that regulatory certainty is not simply “good” or “bad”: its value depends on how tax uncertainty interacts with solvency requirements, risk aversion, and the cost of obtaining certainty. This opens the door to an important policy question: how should the fee for an Advanced Tax Ruling be evaluated when both firms and regulators care about risk, investment incentives, and solvency?

Many thanks to Gereon Seifert for a clear and thought-provoking presentation! We also thank all the participants for the insightful comments and great discussions.