Related papers: Intertemporal Substitutability, Risk Aversion and …
Marginal expected shortfall is unquestionably one of the most popular systemic risk measures. Studying its extreme behaviour is particularly relevant for risk protection against severe global financial market downturns. In this context,…
This paper examines foreign exchange risk premia from simple univariate regressions to the state-space method. The adjusted traditional regressions properly figure out the existence and time-evolving property of the risk premia.…
We use insights from epidemiology, namely the SIR model, to study how agents infect each other with "investment ideas." Once an investment idea "goes viral," equilibrium prices exhibit the typical "fever peak," which is characteristic for…
This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…
We develop a stochastic free-boundary model of housing tenure decisions in markets with high mobility risk, such as areas near military installations. Housing prices and rents follow correlated diffusion processes, and households face an…
Building on a prominent agent-based model, we present a new structural stochastic volatility asset pricing model of fundamentalists vs. chartists where the prices are determined based on excess demand. Specifically, this allows for…
People are often reluctant to sell a house, or shares of stock, below the price at which they originally bought it. While this is generally not consistent with rational utility maximization, it does reflect two strong empirical regularities…
The problem of non-stationarity in financial markets is discussed and related to the dynamic nature of price volatility. A new measure is proposed for estimation of the current asset volatility. A simple and illustrative explanation is…
This paper investigates a robust optimal consumption, investment, and reinsurance problem for an insurer with Epstein-Zin recursive preferences operating under model uncertainty. The insurer's surplus follows the diffusion approximation of…
On a capital market the social group is formed from traders. Individual behaviour of agents is influenced by the need to associate with other agents and to obtain the approval of other agents in the group. Making decisions an individual…
Value at risk (VaR) is a risk measure that has been widely implemented by financial institutions. This paper measures the correlation among asset price changes implied from VaR calculation. Empirical results using US and UK equity indexes…
I show that if the capital accumulation dynamics is stochastic a new term, in addition to that given by accounting prices, has to be introduced in order to derive a correct estimate of the genuine wealth of an economy. In a simple model…
While the use of volatilities is pervasive throughout finance, our ability to determine the instantaneous volatility of stocks is nascent. Here, we present a method for measuring the temporal behavior of stocks, and show that stock prices…
We introduce an equilibrium asset pricing model, which we build on the relationship between a novel risk measure, the Expected Downside Risk (EDR) and the expected return. On the one hand, our proposed risk measure uses a nonparametric…
We propose a unified framework for equity and credit risk modeling, where the default time is a doubly stochastic random time with intensity driven by an underlying affine factor process. This approach allows for flexible interactions…
Existing approaches to asset-pricing under model-uncertainty adapt classical utility-maximization frameworks and seek theoretical comprehensiveness. We move toward practice by considering binary model-risks and by emphasizing 'constraints'…
In nature and human societies, the effects of homogeneous and heterogeneous characteristics on the evolution of collective behaviors are quite different from each other. It is of great importance to understand the underlying mechanisms of…
In real-world decision-making problems, for instance in the fields of finance, robotics or autonomous driving, keeping uncertainty under control is as important as maximizing expected returns. Risk aversion has been addressed in the…
Procyclicality of historical risk measure estimation means that one tends to over-estimate future risk when present realized volatility is high and vice versa under-estimate future risk when the realized volatility is low. Out of it…
We demonstrate that the gain/loss asymmetry observed for stock indices vanishes if the temporal dependence structure is destroyed by scrambling the time series. We also show that an artificial index constructed by a simple average of a…