Related papers: Equity Premium Puzzle or Faulty Economic Modelling…
Motivated by the AIG bailout case in the financial crisis of 2007-2008, we consider an insurer who wants to maximize the expected utility of the terminal wealth by selecting optimal investment and risk control strategies. The insurer's risk…
We run experimental asset markets to investigate the emergence of excess trading and the occurrence of synchronised trading activity leading to crashes in the artificial markets. The market environment favours early investment in the risky…
We present a general approach to the pricing of products in finance and insurance in the multi-period setting. It is a combination of the utility indifference pricing and optimal intertemporal risk allocation. We give a characterization of…
We argue that an important contributing factor into market inefficiency is the lack of a robust mechanism for the stock price to rise if a company has good earnings, e.g., via buybacks/dividends. Instead, the stock price is prone to…
I introduce a model-free methodology to assess the impact of disaster risk on the market return. Using S&P500 returns and the risk-neutral quantile function derived from option prices, I employ quantile regression to estimate local…
While the estimation of risk is an important question in the daily business of banking and insurance, many existing plug-in estimation procedures suffer from an unnecessary bias. This often leads to the underestimation of risk and…
This paper investigates whether climate-friendly food products command a price premium in consumer markets. Using product-level data from a supermarket in Sweden, we examine the relationship between front-of-package climate impact scores…
We consider a mean-reverting stochastic volatility model which satisfies some relevant stylized facts of financial markets. We introduce an algorithm for the detection of peaks in the volatility profile, that we apply to the time series of…
We studied the behavior and variation of utility between the two conflicting players in a closed Nash-equilibrium loop. Our modeling approach also captured the nexus between optimal premium strategizing and firm performance using the…
While the {estimation} of risk is an important question in the daily business of banking and insurance, many existing plug-in estimation procedures suffer from an unnecessary bias. This often leads to the underestimation of risk and…
In this paper, we consider the problem of optimal investment by an insurer. The insurer invests in a market consisting of a bank account and $m$ risky assets. The mean returns and volatilities of the risky assets depend nonlinearly on…
Mixed modeling of extreme values and random effects is relatively unexplored topic. Computational difficulties in using the maximum likelihood method for mixed models and the fact that maximum likelihood method uses available data and does…
We study a dynamic asset pricing problem in which a representative agent is ambiguous about the aggregate endowment growth rate and trades a risky stock, human capital, and a risk-free asset to maximize her preference value of consumption…
This paper considers a newly delayed reinsurance and investment optimization problem incorporating random risk aversion, in which an insurer pursues maximization of the expected certainty equivalent of her/his terminal wealth and the…
In many first-price auctions, bidders face considerable strategic uncertainty: They cannot perfectly anticipate the other bidders' bidding behavior. We propose a model in which bidders do not know the entire distribution of opponent bids…
This paper considers an insurer with two collaborating business lines that faces three critical decisions: (1) dividend payout, (2) reinsurance coverage, and (3) capital injection between the lines, in the presence of model uncertainty. The…
Motivated by recent axiomatic developments, we study the risk- and ambiguity-averse investment problem where trading takes place over a fixed finite horizon and terminal payoffs are evaluated according to a criterion defined in terms of a…
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…
As a firm varies the price of a product, consumers exhibit reference effects, making purchase decisions based not only on the prevailing price but also the product's price history. We consider the problem of learning such behavioral…
In this paper, using the mean-field game theory, we study a problem of equilibrium price formation among many investors with exponential utility in the presence of liabilities unspanned by the security prices. The investors are…