Related papers: Asset management with an ESG mandate
The risk premium is one of main concepts in mathematical finance. It is a measure of the trade-offs investors make between return and risk and is defined by the excess return relative to the risk-free interest rate that is earned from an…
We study a static portfolio optimization problem with two risk measures: a principle risk measure in the objective function and a secondary risk measure whose value is controlled in the constraints. This problem is of interest when it is…
This paper investigates the finite horizon risk-sensitive portfolio optimization in a regime-switching credit market with physical and information-induced default contagion. It is assumed that the underlying regime-switching process has…
Expected Shortfall (ES), also known as superquantile or Conditional Value-at-Risk, has been recognized as an important measure in risk analysis and stochastic optimization, and is also finding applications beyond these areas. In finance, it…
In portfolio optimization problems, the minimum expected investment risk is not always smaller than the expected minimal investment risk. That is, using a well-known approach from operations research, it is possible to derive a strategy…
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 class of stochastic control problems with implicitly defined objective functions, which are the sources of time-inconsistency. We study the closed-loop equilibrium solutions in a general controlled diffusion…
We introduce a method to estimate simultaneously the tail and the threshold parameters of an extreme value regression model. This standard model finds its use in finance to assess the effect of market variables on extreme loss distributions…
We consider a financial intermediary managing assets and liabilities exposed to several risk sources and seeking an optimal portfolio strategy to minimise the initial capital invested and the total risk associated with investment losses and…
In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
In the presence of ambiguity on the driving force of market randomness, we consider the dynamic portfolio choice without any predetermined investment horizon. The investment criteria is formulated as a robust forward performance process,…
Diversification is a cornerstone of robust portfolio construction, yet its application remains fraught with challenges due to model uncertainty and estimation errors. Practitioners often rely on sophisticated, proprietary heuristics to…
We present a novel approach to the pricing of financial instruments in emission markets, for example, the EU ETS. The proposed structural model is positioned between existing complex full equilibrium models and pure reduced form models.…
We study submodularity for law-invariant functionals, with particular attention to convex risk measures. Expected losses are modular, and certainty equivalents are submodular exactly when the loss function is convex. Law-invariant coherent…
The standard asset pricing models (the CCAPM and the Epstein-Zin non-expected utility model) counterintuitively predict that equilibrium asset prices can rise if the representative agent's risk aversion increases. If the income effect,…
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…
Value at risk and expected shortfall are increasingly popular tail risk measures in the financial risk management field. Both academia and financial institutions are working to improve tail risk forecasts in order to meet the requirements…
One index satisfies the duality axiom if one agent, who is uniformly more risk-averse than another, accepts a gamble, the latter accepts any less risky gamble under the index. Aumann and Serrano (2008) show that only one index defined for…
In this paper, we consider the asset-liability management under the mean-variance criterion. The financial market consists of a risk-free bond and a stock whose price process is modeled by a geometric Brownian motion. The liability of the…