Related papers: Absolute Return Volatility
We study capital requirements for bounded financial positions defined as the minimum amount of capital to invest in a chosen eligible asset targeting a pre-specified acceptability test. We allow for general acceptance sets and general…
We study market-consistent valuation of liability cash flows motivated by current regulatory frameworks for the insurance industry. Building on the theory on multiple-prior optimal stopping we propose a valuation functional with sound…
This paper investigates how the conditional quantiles of future returns and volatility of financial assets vary with various measures of ex-post variation in asset prices as well as option-implied volatility. We work in the flexible…
This paper studies robust forward investment and consumption preferences within a zero-volatility context. Different from previous works, we consider an incomplete financial market model due to general investment portfolio constraints. We…
The dynamics of prices in financial markets has been studied intensively both experimentally (data analysis) and theoretically (models). Nevertheless, a complete stochastic characterization of volatility is still lacking. What it is well…
Model risk has a huge impact on any risk measurement procedure and its quantification is therefore a crucial step. In this paper, we introduce three quantitative measures of model risk when choosing a particular reference model within a…
We find economically and statistically significant gains when using machine learning for portfolio allocation between the market index and risk-free asset. Optimal portfolio rules for time-varying expected returns and volatility are…
An empirical analysis, suggested by optimal Merton dynamics, reveals some unexpected features of asset volumes. These features are connected to traders' belief and risk aversion. This paper proposes a trading strategy model in the optimal…
Recent empirical studies suggest that the volatilities associated with financial time series exhibit short-range correlations. This entails that the volatility process is very rough and its autocorrelation exhibits sharp decay at the…
We introduce a bond portfolio management theory based on foundations similar to those of stock portfolio management. A general continuous-time zero-coupon market is considered. The problem of optimal portfolios of zero-coupon bonds is…
We represent preferences that exhibit absolute or relative attitudes towards ambiguity without assuming convexity of preferences. Our analysis is motivated by the recent experimental evidence by Baillon and Placido (2019) indicating that…
An investor's risk aversion is assumed to tend to infinity. In a fairly general setting, we present conditions ensuring that the respective utility indifference prices of a given contingent claim converge to its super replication price.
This paper discusses an alternative explanation for the empirical findings contradicting the positive relationship between risk (variance) and reward (expected return). We show that these contradicting results might be due to the false…
The risk of financial positions is measured by the minimum amount of capital to raise and invest in eligible portfolios of traded assets in order to meet a prescribed acceptability constraint. We investigate nondegeneracy, finiteness and…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
Realization of uncertainty of prices is captured by volatility, that is the tendency of prices to vary along a period of time. This is generally measured as standard deviation of daily returns. In this paper we propose and investigate the…
We consider a continuous-time market with proportional transaction costs. Under appropriate assumptions we prove the existence of optimal strategies for investors who maximize their worst-case utility over a class of possible models. We…
In an incomplete semimartingale model of a financial market, we consider several risk-averse financial agents who negotiate the price of a bundle of contingent claims. Assuming that the agents' risk preferences are modelled by convex…
The volatility characterizes the amplitude of price return fluctuations. It is a central magnitude in finance closely related to the risk of holding a certain asset. Despite its popularity on trading floors, the volatility is unobservable…
We study mean-risk optimal portfolio problems where risk is measured by Recovery Average Value at Risk, a prominent example in the class of recovery risk measures. We establish existence results in the situation where the joint distribution…