Related papers: Intertemporal Substitutability, Risk Aversion and …
With the rise of emerging risks, model uncertainty poses a fundamental challenge in the insurance industry, making robust pricing a first-order question. This paper investigates how insurers' robustness preferences shape competitive…
Many complex systems exhibit extreme events far more often than expected for a normal distribution. This work examines how self-similar bursts of activity across several orders of magnitude can emerge from first principles in systems that…
In both finance and economics, quantitative models are usually studied as isolated mathematical objects --- most often defined by very strong simplifying assumptions concerning rationality, efficiency and the existence of disequilibrium…
We present a mathematical model of a market with $m$ shares traded across $n$ investor groups, each one with similar motivations and trading strategies. The market of each asset consists of a fixed amount of cash and shares (no additions…
We develop a new identification strategy for demand estimation when cost shifters may not be available and there are substantial variations in demand over time. This approaches relies on a kind of nonlinear difference-in-differences, in…
Trading pressure from one asset can move the price of another, a phenomenon referred to as cross impact. Using tick-by-tick data spanning 5 years for 500 assets listed in the United States, we identify the features that make cross-impact…
We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…
The price multiplier effect provides precious insight into the behavior of investors during episodes of speculative trading. It tells us that the higher the price of an asset is (within a set of similar assets) the more its price is likely…
Asset correlations are an intuitive and therefore popular way to incorporate event dependence into event risk, e.g., default risk, modeling. In this paper we study the case of estimation of inter-sector asset correlations by separation of…
Do workers always work more for more? We investigate how intertemporal and uncompensated labor supply decisions change across observational and experimental windows, within the same workers. Combining a real-effort emoji-counting experiment…
An investor with constant relative risk aversion and an infinite planning horizon trades a risky and a safe asset with constant investment opportunities, in the presence of small transaction costs and a binding exogenous portfolio…
During a stock market peak the price of a given stock ($ i $) jumps from an initial level $ p_1(i) $ to a peak level $ p_2(i) $ before falling back to a bottom level $ p_3(i) $. The ratios $ A(i) = p_2(i)/p_1(i) $ and $ B(i)= p_3(i)/p_1(i)…
Value-at-risk is one of the important subjects that extensively used by researchers and practitioners for measuring and managing uncertainty in financial markets. Although value-at-risk is a common risk control instrument, but there are…
Here, we analyse the behaviour of the higher order standardised moments of financial time series when we truncate a large data set into smaller and smaller subsets, referred to below as time windows. We look at the effect of the economic…
Economic models with input-output networks assume that firm or sector (unit) growth is driven by a weighted sum of trade partners' growth and an independently-drawn idiosyncratic shock. I show that the idiosyncratic risk assumption in a…
This paper discusses a novel explanation for asymmetric volatility based on the anchoring behavioral pattern. Anchoring as a heuristic bias causes investors focusing on recent price changes and price levels, which two lead to a belief in…
Extremal dependence between international stock markets is of particular interest in today's global financial landscape. However, previous studies have shown this dependence is not necessarily stationary over time. We concern ourselves with…
We contrast Arbitrage Pricing Theory (APT), the theoretical basis for the development of financial instruments, with a dynamical picture of an interacting market, in a simple setting. The proliferation of financial instruments apparently…
We perform return interval analysis of 1-min {\em{realized volatility}} defined by the sum of absolute high-frequency intraday returns for the Shanghai Stock Exchange Composite Index (SSEC) and 22 constituent stocks of SSEC. The scaling…
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…