Related papers: Solution to the Equity Premium Puzzle with Time-Va…
This paper examines foreign exchange risk premia from simple univariate regressions to the state-space method. The adjusted traditional regressions properly figure out the existence and time-evolving property of the risk premia.…
We propose an empirical method to analyze data from first-price procurements where bidders are asymmetric in their risk-aversion (CRRA) coefficients and distributions of private costs. Our Bayesian approach evaluates the likelihood by…
In this work, we address risk-averse Bayes-adaptive reinforcement learning. We pose the problem of optimising the conditional value at risk (CVaR) of the total return in Bayes-adaptive Markov decision processes (MDPs). We show that a policy…
We study a portfolio optimization problem for competitive agents with CRRA utilities and a common finite time horizon. The utility of an agent depends not only on her absolute wealth and consumption but also on her relative wealth and…
While the original Ait-Sahalia interest rate model has been found considerable use as a model for describing time series evolution of interest rates, it may not possess adequate specifications to explain responses of interest rates to…
In this paper we develop a symbolic technique to obtain asymptotic expressions for ruin probabilities and discounted penalty functions in renewal insurance risk models when the premium income depends on the present surplus of the insurance…
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…
In this paper we discuss a general methodology to compute the market risk measure over long time horizons and at extreme percentiles, which are the typical conditions needed for estimating Economic Capital. The proposed approach extends the…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
This paper considers a robust time-consistent mean-variance-skewness portfolio selection problem for an ambiguity-averse investor by taking into account wealth-dependent risk aversion and wealth-dependent skewness preference as well as…
We introduce a pricing kernel with time-varying volatility risk aversion to explain observed time variations in the shape of the pricing kernel. When combined with the Heston-Nandi GARCH model, this framework yields a tractable option…
We study the estimation of risk-sensitive policies in reinforcement learning problems defined by a Markov Decision Process (MDPs) whose state and action spaces are countably finite. Prior efforts are predominately afflicted by computational…
Recently equal risk pricing, a framework for fair derivative pricing, was extended to consider dynamic risk measures. However, all current implementations either employ a static risk measure that violates time consistency, or are based on…
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…
This paper investigates a robust optimal consumption, investment, and reinsurance problem for an insurer with Epstein-Zin recursive preferences operating under model uncertainty. The insurer's surplus follows the diffusion approximation of…
We propose a novel strategy for multivariate extreme value index estimation. In applications such as finance, volatility and risk present in the components of a multivariate time series are often driven by the same underlying factors, such…
The risk premium of a policy is the sum of the pure premium and the risk loading. In the classification ratemaking process, generalized linear models are usually used to calculate pure premiums, and various premium principles are applied to…
We investigate the portfolio selection problem for an agent with rank-dependent utility in an incomplete financial market. For a constant-coefficient market and CRRA utilities, we characterize the deterministic strict equilibrium…
We amend and extend the Chiarella model of financial markets to deal with arbitrary long-term value drifts in a consistent way. This allows us to improve upon existing calibration schemes, opening the possibility of calibrating individual…
We consider insurance derivatives depending on an external physical risk process, for example a temperature in a low dimensional climate model. We assume that this process is correlated with a tradable financial asset. We derive optimal…