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In this paper, we study properties of certain risk measures associated with acceptance sets. These sets describe regulatory preconditions that have to be fulfilled by financial institutions to pass a given acceptance test. If the financial…
The notion of a credit spread curve is fundamental in fixed income investing, but in practice it is not `given' and needs to be constructed from bond prices either for a particular issuer, or for a sector rating-by-rating. Rather than…
Risk aversion and insurance are two prominent and interconnected concepts in economics and finance. To explore their fundamental connection, we introduce risk-insurance parity, which associates various classes of insurance contracts with…
This paper discusses an alternative explanation for the empirical findings contradicting the positive relationship between risk (variance) and reward (expected return). We show that these contradicting results might be due to the false…
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…
We consider a single-period portfolio selection problem for an investor, maximizing the expected ratio of the portfolio utility and the utility of a best asset taken in hindsight. The decision rules are based on the history of stock returns…
The inf-convolution of risk measures is directly related to risk sharing and general equilibrium, and it has attracted considerable attention in mathematical finance and insurance problems. However, the theory is restricted to finite sets…
In the presence of model risk, it is well-established to replace classical expected values by worst-case expectations over all models within a fixed radius from a given reference model. This is the "robustness" approach. We show that…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
The use of robo-readers to analyze news texts is an emerging technology trend in computational finance. In recent research, a substantial effort has been invested to develop sophisticated financial polarity-lexicons that can be used to…
We study issues of robustness in the context of Quantitative Risk Management and Optimization. We develop a general methodology for determining whether a given risk measurement related optimization problem is robust, which we call…
We study a general robust utility maximization problem in a discrete-time frictionless market. The investor is assumed to have a possibly infinite, random, nonconcave, and nondecreasing utility function defined on the whole real line. She…
Deep learning methods have become a widespread toolbox for pricing and calibration of financial models. While they often provide new directions and research results, their `black box' nature also results in a lack of interpretability. We…
Risk assessment under different possible scenarios is a source of uncertainty that may lead to concerning financial losses. We address this issue, first, by adapting a robust framework to the class of spectral risk measures. Second, we…
The purpose of this paper relies on the study of long term yield curves modeling. Inspired by the economic litterature, it provides a financial interpretation of the Ramsey rule that links discount rate and marginal utility of aggregate…
We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent…
Fixed income markets share many features with the equity markets. However there are significant differences as well and many attempts have been done in the past to develop specific tools which describe (and possibly forecasts) the behavior…
We study Pareto efficiency in a pure-exchange economy where agents' preferences are represented by risk-averse monetary utilities. These coincide with law-invariant monetary utilities, and they can be shown to correspond to the class of…
In statistical analysis, many classic results require the assumption that models have finite mean or variance, including the most standard versions of the laws of large numbers and the central limit theorems. Such an assumption may not be…
This paper studies a finite-horizon portfolio selection problem with non-concave terminal utility and proportional transaction costs, in which the commonly used concavification principle for terminal value is no longer applicable. We…