Related papers: Generalized asset pricing: Expected Downside Risk-…
Several phenomena are available representing market activity: volumes, number of trades, durations between trades or quotes, volatility - however measured - all share the feature to be represented as positive valued time series. When…
The estimation of risk measures recently gained a lot of attention, partly because of the backtesting issues of expected shortfall related to elicitability. In this work we shed a new and fundamental light on optimal estimation procedures…
In this work, we study the weighted empirical risk minimization (weighted ERM) schema, in which an additional data-dependent weight function is incorporated when the empirical risk function is being minimized. We show that under a general…
Generally, in the financial literature, the notion of quadratic VaR is implicitly confused with the Delta-Gamma VaR, because more authors dealt with portfolios that contains derivatives instruments. In this paper, we postpone to estimate…
ESG ratings provide a quantitative measure for socially responsible investment. We present a unified framework for incorporating numeric ESG ratings into dynamic pricing theory. Specifically, we introduce an ESG-valued return that is a…
In this paper we provide a quantitative analysis to the concept of arbitrage, that allows to deal with model uncertainty without imposing the no-arbitrage condition. In markets that admit ``small arbitrage", we can still make sense of the…
We consider the consumption-based asset pricing model, derive a new modified basic pricing equation, and present its successive approximations using the Taylor series expansions of the investor's utility during the averaging time interval.…
Exponential tilting is a technique commonly used in fields such as statistics, probability, information theory, and optimization to create parametric distribution shifts. Despite its prevalence in related fields, tilting has not seen…
In [1] we presented a model for transactions when goods are given away in the expectation of a later settlement. In settings where people keep track of their social accounts we were able to redefine concepts like account balance, yield…
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant…
Because the asset value of a private company does not observable except in quarterly reports, the structural model has not been developed for a private company. For this reason, this paper attempt to develop the Merton's structural model…
We derive a closed-form expression capturing the degree of Relative Risk Aversion (RRA) of investors for non-"fair" lotteries. We argue that our formula is superior to earlier methods that have been proposed, as it is a function of only…
We investigate the portfolio frontier and risk premia in equilibrium when institutional investors aim to minimize the tracking error variance under an ESG score mandate. If a negative ESG premium is priced in the market, this mandate can…
We consider insurance derivatives depending on an external physical risk process, for example a temperature in a low dimensional climate model. We assume that this process is correlated with a tradable financial asset. We derive optimal…
This paper introduces a novel robust trading paradigm, called \textit{multi-double linear policies}, situated within a \textit{generalized} lattice market. Distinctively, our framework departs from most existing robust trading strategies,…
The stochastic variational inequality problem (SVIP) is an equilibrium model that includes random variables and has been widely applied in various fields such as economics and engineering. Expected residual minimization (ERM) is an…
In this paper, we generalize the parametric delta-VaR method from portfolios with normally distributed risk factors to portfolios with elliptically distributed ones. We treat both the expected shortfall and the Value-at-Risk of such…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…