Related papers: Exact Value Solution to the Equity Premium Puzzle

This paper studies the equal risk pricing (ERP) framework for the valuation of European financial derivatives. This option pricing approach is consistent with global trading strategies by setting the premium as the value such that the…

This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…

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…

We develop a framework for convexifying a fairly general class of optimization problems. Under additional assumptions, we analyze the suboptimality of the solution to the convexified problem relative to the original nonconvex problem and…

We account for time-varying parameters in the conditional expectile-based value at risk (EVaR) model. The EVaR downside risk is more sensitive to the magnitude of portfolio losses compared to the quantile-based value at risk (QVaR). Rather…

Prudent management of insurance investment portfolios requires competent asset pricing of fixed-income assets with time-to-event contingent cash flows, such as consumer asset-backed securities (ABS). Current market pricing techniques for…

This paper studies the dividend and capital injection problem under a diffusion risk model with general discount functions. A proportional cost is imposed when injecting capitals. For exponential discounting as time-consistent benchmark, we…

This paper demonstrates a practical method for computing the solution of an expectation-constrained robust maximization problem with immediate applications to model-free no-arbitrage bounds and super-replication values for many financial…

This paper studies the optimal timing to liquidate credit derivatives in a general intensity-based credit risk model under stochastic interest rate. We incorporate the potential price discrepancy between the market and investors, which is…

CRRA utility where the risk aversion coefficient is a constant is commonly seen in various economics models. But wealth-driven risk aversion rarely shows up in investor's investment problems. This paper mainly focus on numerical solutions…

Keeping risk under control is often more crucial than maximizing expected rewards in real-world decision-making situations, such as finance, robotics, autonomous driving, etc. The most natural choice of risk measures is variance, which…

Several authors have recently developed risk-sensitive policy gradient methods that augment the standard expected cost minimization problem with a measure of variability in cost. These studies have focused on specific risk-measures, such as…

Risk-averse decision-making under uncertainty in partially observable domains is a central challenge in artificial intelligence and is essential for developing reliable autonomous agents. The formal framework for such problems is the…

We consider a discrete-time version of the popular optimal dividend pay-out problem in risk theory. The novel aspect of our approach is that we allow for a risk averse insurer, i.e., instead of maximising the expected discounted dividends…

We evaluated the implications of different approaches to characterize uncertainty of calibrated parameters of stochastic decision models (DMs) in the quantified value of such uncertainty in decision making. We used a microsimulation DM of…

We propose a method for designing policies for convex stochastic control problems characterized by random linear dynamics and convex stage cost. We consider policies that employ quadratic approximate value functions as a substitute for the…

Modified policy iteration (MPI) is a dynamic programming algorithm that combines elements of policy iteration and value iteration. The convergence of MPI has been well studied in the context of discounted and average-cost MDPs. In this…

We study the optimal portfolio selection problem under relative performance criteria in the market model with random coefficients from the perspective of many players game theory. We consider five random coefficients which consist of three…

A quadratic discrete time probabilistic model, for optimal portfolio selection in (re-)insurance is studied. For positive values of underwriting levels, the expected value of the accumulated result is optimized, under constraints on its…

This paper develops a safety analysis method for stochastic systems that is sensitive to the possibility and severity of rare harmful outcomes. We define risk-sensitive safe sets as sub-level sets of the solution to a non-standard optimal…