Related papers: Risk Aversion and Insurance Propensity
This article proposes a new class of risk-sharing rules by exploring the relationship between capital allocation and risk sharing. While the former is concerned with ex-ante allocating capitals to different lines of business within a…
Risk aversion is a key element of utility maximizing hedge strategies; however, it has typically been assigned an arbitrary value in the literature. This paper instead applies a GARCH-in-Mean (GARCH-M) model to estimate a time-varying…
No one doubts the utility of insurance for its ability to spread risk or streamline claims management; much debated is when and how insurance uptake can improve welfare by reducing harm, despite moral hazard. Proponents and dissenters of…
The fundamental principle in Modern Portfolio Theory (MPT) is based on the quantification of the portfolio's risk related to performance. Although MPT has made huge impacts on the investment world and prompted the success and prevalence of…
Risk control has become one of the major concern of financial institutions. The need for adequate statistical tools to measure and anticipate the amplitude of the potential moves of financial markets is clearly expressed, in particular for…
In economics, insurance and finance, value at risk (VaR) is a widely used measure of the risk of loss on a specific portfolio of financial assets. For a given portfolio, time horizon, and probability $\alpha$, the $100\alpha\%$ VaR is…
We develop an averaging approach to robust risk measurement under payoff uncertainty. Instead of taking a worst-case value over an uncertainty neighborhood, we weight nearby payoffs more heavily under a chosen metric and average the…
This work suggests the estimation method developed in relation to the position of the robotic system (RS) operator, showing his degree of risk proneness. The base models are: Hurwitz pessimism/optimism criterion and decision trees. The…
This seemed impossible to use a theoretically adequate but too sophisticated risk measure called non-ruin capital, whence its widespread (including regulatory documents) replacement with an inadequate, but simple risk measure called…
We study the hedging and valuation of European and American claims on a non-traded asset $Y$, when a traded stock $S$ is available for hedging, with $S$ and $Y$ following correlated geometric Brownian motions. This is an incomplete market,…
Models for epidemic spread typically account for variable risk factors but do not account for the correlation between behavior and risk. Here we extend these models to account for such correlations. We find that a positive correlation…
In this paper, we study the robust optimal investment and risk control problem for an insurer who owns the insider information about the financial market and the insurance market under model uncertainty. Both financial risky asset 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…
The objective in a traditional reinforcement learning (RL) problem is to find a policy that optimizes the expected value of a performance metric such as the infinite-horizon cumulative discounted or long-run average cost/reward. In…
In this short communication, we describe the recent debate on whether the hazard function should be used for causal inference in time-to-event studies and consider three different potential outcomes frameworks (by Rubin, Robins, and Pearl,…
In behavioral finance, aversion affects investors' judgment of future uncertainty when profit and loss occur. Considering investors' aversion to loss and risk, and the ambiguous uncertainty characterizing asset returns, we construct a…
Is the elasticity of intertemporal substitution (EIS) more or less than one? This question can be answered by confronting theoretical results of asset pricing models with investor behaviour during episodes of stock market panic. If we…
We show in a simulation when economic agents are subject to evolution (random change and selection based on the success in the estimation of the result of the gamble) they acquire risk aversive behavior. This behavior appears in the form of…
For an investor with constant absolute risk aversion and a long horizon, who trades in a market with constant investment opportunities and small proportional transaction costs, we obtain explicitly the optimal investment policy, its implied…
We develop a new approach to solving classification problems, which is bases on the theory of coherent measures of risk and risk sharing ideas. The proposed approach aims at designing a risk-averse classifier. The new approach allows for…