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The equity risk premium puzzle is that the return on equities has far exceeded the average return on short-term risk-free debt and cannot be explained by conventional representative-agent consumption based equilibrium models. We review a…
We assume that an agent's rate of consumption is {\it ratcheted}; that is, it forms a non-decreasing process. Given the rate of consumption, we act as financial advisers and find the optimal investment strategy for the agent who wishes to…
We present a multilayer network model for credit risk assessment. Our model accounts for multiple connections between borrowers (such as their geographic location and their economic activity) and allows for explicitly modelling the…
Credit ratings are widely used by investors as a screening device. We introduce and study several natural notions of risk consistency that promote prudent investment decisions in the framework of Choquet rating criteria. Three closely…
The market practice of extrapolating different term structures from different instruments lacks a rigorous justification in terms of cash flows structure and market observables. In this paper, we integrate our previous consistent theory for…
An asset pricing model using long-run capital share growth risk has recently been found to successfully explain U.S. stock returns. Our paper adopts a recursive preference utility framework to derive an heterogeneous asset pricing model…
This article examines the economic effects of an increase in the duration of home loans on households, focusing on the French real estate market. It highlights trends in the property market, existing loan systems in other countries (such as…
Energy forecasting has attracted enormous attention over the last few decades, with novel proposals related to the use of heterogeneous data sources, probabilistic forecasting, online learn-ing, etc. A key aspect that emerged is that…
We hypothesize that portfolio sorts based on the V/P ratio generate excess returns and consist of companies that are undervalued for prolonged periods. Results, for the US market show that high V/P portfolios outperform low V/P portfolios…
Covered bonds are a specific example of senior secured debt. If the issuer of the bonds defaults the proceeds of the assets in the cover pool are used for their debt service. If in this situation the cover pool proceeds do not suffice for…
This paper analyses how risk-taking behaviour and preferences over consumption rank can emerge as a neutrally stable equilibrium when individuals face an anti-coordination task. If in an otherwise homogeneous society information about…
We study the societal impact of pseudo-scientific assumptions for predicting the behavior of people in a straightforward application of machine learning to risk prediction in financial lending. This use case also exemplifies the impact of…
A novel procedure is presented for the objective comparison and evaluation of a bank's decision rules in optimising the timing of loan recovery. This procedure is based on finding a delinquency threshold at which the financial loss of a…
Financial markets are exposed to systemic risk (SR), the risk that a major fraction of the system ceases to function, and collapses. It has recently become possible to quantify SR in terms of underlying financial networks where nodes…
We study a model of a corporation which has the possibility to choose various production/business policies with different expected profits and risks. In the model there are restrictions on the dividend distribution rates as well as…
The lifetime behaviour of loans is notoriously difficult to model, which can compromise a bank's financial reserves against future losses, if modelled poorly. Therefore, we present a data-driven comparative study amongst three techniques in…
We consider the optimal risk transfer from an insurance company to a reinsurer. The problem formulation considered in this paper is closely connected to the optimal portfolio problem in finance, with some crucial distinctions. In…
Using a large quarterly macroeconomic dataset for the period 1960-2017, we document the ability of specific financial ratios from the housing market and firms' aggregate balance sheets to predict GDP over medium-term horizons in the United…
We study a reinsurer who faces multiple sources of model uncertainty. The reinsurer offers contracts to $n$ insurers whose claims follow compound Poisson processes representing both idiosyncratic and systemic sources of loss. As the…
Financial global crisis has devastating impacts to economies since early XX century and continues to impose increasing collateral damages for governments, enterprises, and society in general. Up to now, all efforts to obtain efficient…