Related papers: Time-Consistent Actuarial Valuations
It is customary to estimate error-in-variables models using higher-order moments of observables. This moments-based estimator is consistent only when the coefficient of the latent regressor is assumed to be non-zero. We develop a new…
We combine forward investment performance processes and ambiguity averse portfolio selection. We introduce the notion of robust forward criteria which addresses the issues of ambiguity in model specification and in preferences and…
This paper studies the pricing of contingent claims of American style, using indifference pricing by fully dynamic convex risk measures. We provide a general definition of risk-indifference prices for buyers and sellers in continuous time,…
Executing even moderately large derivatives orders can be expensive and risky; it's hard to balance the uncertainty of working an order over time versus paying a liquidity premium for immediate execution. Here, we introduce the Time Is…
We consider dynamic pricing with covariates under a generalized linear demand model: a seller can dynamically adjust the price of a product over a horizon of $T$ time periods, and at each time period $t$, the demand of the product is…
The article's aim is to provide a solution to the equity premium puzzle with a derived model. The derived model which depends on Consumption Capital Asset Pricing Model gives a solution to the puzzle with the values of coefficient of…
We propose a discrete time algorithm for the valuation of employee stock options based on exponential indifference prices and taking into account both the possibility of partial exercise of a fraction of the options and the use of a…
Time reversal invariance can be summarized as follows: no difference can be measured if a sequence of events is run forward or backward in time. Because price time series are dominated by a randomness that hides possible structures and…
When we implement a portfolio selection methodology under a mean-risk formulation, it is essential to correctly model investors' risk aversion which may be time-dependent, or even state-dependent during the investment procedure. In this…
We consider indifference pricing of contingent claims consisting of payment flows in a discrete time model with proportional transaction costs and under exponential disutility. This setting covers utility maximisation as a special case. A…
We present an approach to the dynamic valuation of exposure risks in the multi-period setting, which incorporates a dynamic and multiple diversification of risks in Pareto optimal sense. This approach extends classical indifference premium…
We study a continuous time contracting model in which a principal hires a risk averse agent to manage a project over a finite horizon and provides sequential payments whose timing is endogenously determined. The resulting nonzero-sum…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
We consider pure-jump transaction-level models for asset prices in continuous time, driven by point processes. In a bivariate model that admits cointegration, we allow for time deformations to account for such effects as intraday seasonal…
A possibly immortal agent tries to maximise its summed discounted rewards over time, where discounting is used to avoid infinite utilities and encourage the agent to value current rewards more than future ones. Some commonly used discount…
It is well established that in a market with inclusion of a risk-free asset the single-period mean-variance efficient frontier is a straight line tangent to the risky region, a fact that is the very foundation of the classical CAPM. In this…
The net-premium principle is considered to be the most genuine and fair premium principle in actuarial applications. However, an insurance company, applying the net-premium principle, goes bankrupt with probability one in the long run, even…
A pricing principle is introduced for non-attainable $q$-exponential bounded contingent claims in an incomplete Brownian motion market setting. The buyer evaluates the contingent claim under the ``distorted Radon-Nikodym derivative'' and…
We analyze the stability of general nonlinear discrete-time stochastic systems controlled by optimal inputs that minimize an infinite-horizon discounted cost. Under a novel stochastic formulation of cost-controllability and detectability…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…