Related papers: Contract Structure and Risk Aversion in Longevity …
Stable and efficient food markets are crucial for global food security, yet international staple food markets are increasingly exposed to complex risks, including intensified risk contagion and escalating external uncertainties. This paper…
This paper studies robust forward investment and consumption preferences and optimal strategies for a risk-averse and ambiguity-averse agent in an incomplete financial market with drift and volatility uncertainties. We focus on non-zero…
Systemic risk in banking systems remains a crucial issue that it has not been completely understood. In our toy model, banks are exposed to two sources of risks, namely, market risk from their investments in assets external to the banking…
This paper proposes a novel continuous-time dynamic contract framework that has a risk-limiting capability. If a principal and an agent enter into such a contract, the principal can optimally manage its performance and risk with a guarantee…
This paper assesses the hedge effectiveness of an index-based longevity swap and a longevity cap. Although swaps are a natural instrument for hedging longevity risk, derivatives with non-linear pay-offs, such as longevity caps, also provide…
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…
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…
This study investigates the functioning of modern payment systems through the lens of banks' maturity mismatch practices, and it examines the effects of banks' refusal to roll over short-term interbank liabilities on financial stability.…
Most people are risk-averse (risk-seeking) when they expect to gain (lose). Based on a generalization of ``expected utility theory'' which takes this into account, we introduce an automaton mimicking the dynamics of economic operations.…
This paper studies a Kyle-Back model with a risk-averse insider possessing exponential utility and a dynamic stochastic signal about the asset's terminal fundamental value. While the existing literature considers either risk-neutral…
We introduce contracts for linear dynamical systems with inputs and outputs. Contracts are used to express formal specifications on the dynamic behaviour of such systems through two aspects: assumptions and guarantees. The assumptions are a…
We consider the problem of Adverse Selection and optimal derivative design within a Principal-Agent framework. The principal's income is exposed to non-hedgeable risk factors arising, for instance, from weather or climate phenomena. She…
This paper proposes a market consistent valuation framework for variable annuities with guaranteed minimum accumulation benefit, death benefit and surrender benefit features. The setup is based on a hybrid model for the financial market and…
Risk perceptions are essential in cyber insurance contracts. With the recent surge of information, human risk perceptions are exposed to the influences from both beneficial knowledge and fake news. In this paper, we study the role of the…
Many real-world domains require safe decision making in uncertain environments. In this work, we introduce a deep reinforcement learning framework for approaching this important problem. We consider a distribution over transition models,…
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…
We investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…
Using intraday data for the cross-section of individual stocks, we show that both transitory and persistent fluctuations in realized market and average idiosyncratic volatility, skewness and kurtosis are differentially priced in the…
While the investors' responses to price changes and their price forecasts are well accepted major factors contributing to large price fluctuations in financial markets, our study shows that investors' heterogeneous and dynamic risk aversion…
The emerging interest in low-latency high-reliability applications, such as connected vehicles, necessitates a new abstraction between communication and control. Thanks to advances in cyber-physical systems over the past decades, we…