Related papers: Time-Consistent Actuarial Valuations
This paper re-examines the problem of estimating risk premia in linear factor pricing models. Typically, the data used in the empirical literature are characterized by weakness of some pricing factors, strong cross-sectional dependence in…
This paper discusses a nonlinear integral equation arising from portfolio selection with a class of time-inconsistent preferences. We propose a unified framework requiring minimal assumptions, such as right-continuity of market coefficients…
We study robust notions of good-deal hedging and valuation under combined uncertainty about the drifts and volatilities of asset prices. Good-deal bounds are determined by a subset of risk-neutral pricing measures such that not only…
This paper revisits and extends the convergence and robustness properties of value and policy iteration algorithms for discrete-time linear quadratic regulator problems. In the model-based case, we extend current results concerning the…
This paper studies the dividend and capital injection problem under a diffusion risk model with general discount functions. A proportional cost is imposed when injecting capitals. For exponential discounting as time-consistent benchmark, we…
To improve the efficient frontier of the classical mean-variance model in continuous time, we propose a varying terminal time mean-variance model with a constraint on the mean value of the portfolio asset, which moves with the varying…
The purpose of this work is to explore the role that arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a stationary…
Under non-exponential discounting, we develop a dynamic theory for stopping problems in continuous time. Our framework covers discount functions that induce decreasing impatience. Due to the inherent time inconsistency, we look for…
We consider a discrete-time dividend payout problem with risk sensitive shareholders. It is assumed that they are equipped with a risk aversion coefficient and construct their discounted payoff with the help of the exponential premium…
The modeling of high-frequency data that qualify financial asset transactions has been an area of relevant interest among statisticians and econometricians -- above all, the analysis of time series of financial durations. Autoregressive…
We model investor heterogeneity using different required returns on an investment and evaluate the impact on the valuation of an investment. By assuming no disagreement on the cash flows, we emphasize how risk preferences in particular, but…
In this paper, we attempt to introduce the Bellman principle for a discrete time multi-period mean-variance model. Based on this new take on the Bellman principle, we obtain a dynamic time-consistent optimal strategy and related efficient…
Financial markets are often modelled as if time were unique and continuous across assets and markets. Financial markets are however asynchronous, order flow is event-driven, and waiting times between events are often random. Many of the…
In many sequential decision-making problems we may want to manage risk by minimizing some measure of variability in rewards in addition to maximizing a standard criterion. Variance related risk measures are among the most common…
Constant Proportion Portfolio Insurance (CPPI) is an investment strategy designed to give participation in the performance of a risky asset while protecting the invested capital. This protection is however not perfect and the gap risk must…
We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain…
Temporal difference learning with linear function approximation is a popular method to obtain a low-dimensional approximation of the value function of a policy in a Markov Decision Process. We give a new interpretation of this method in…
We study a discrete-time consumption-based capital asset pricing model under expectations-based reference-dependent preferences. More precisely, we consider an endowment economy populated by a representative agent who derives utility from…
We study the problem of pricing variable annuities with a multi-layer expense strategy, under which the insurer charges fees from the policyholder's account only when the account value lies in some pre-specified disjoint intervals, where on…
In multivariate time series, the estimation of the covariance matrix of the observation innovations plays an important role in forecasting as it enables the computation of the standardized forecast error vectors as well as it enables the…