Related papers: Betting Around the Clock: Time Change and Long Ter…
Consider an insurance company exposed to a stochastic economic environment that contains two kinds of risk. The first kind is the insurance risk caused by traditional insurance claims, and the second kind is the financial risk resulting…
Classical portfolio optimization often requires forecasting asset returns and their corresponding variances in spite of the low signal-to-noise ratio provided in the financial markets. Modern deep reinforcement learning (DRL) offers a…
In recent studies the truncated Levy process (TLP) has been shown to be very promising for the modeling of financial dynamics. In contrast to the Levy process, the TLP has finite moments and can account for both the previously observed…
In this paper, we study the Black-Litterman (BL) asset allocation model (Black and Litterman, 1990) under the hidden truncation skew-normal distribution (Arnold and Beaver, 2000). In particular, when returns are assumed to follow this skew…
Temporal-Difference learning (TD) [Sutton, 1988] with function approximation can converge to solutions that are worse than those obtained by Monte-Carlo regression, even in the simple case of on-policy evaluation. To increase our…
Peters (2011a) defined an optimal leverage which maximizes the time-average growth rate of an investment held at constant leverage. It was hypothesized that this optimal leverage is attracted to 1, such that, e.g., leveraging an investment…
We examine how the most prevalent stochastic properties of key financial time series have been affected during the recent financial crises. In particular we focus on changes associated with the remarkable economic events of the last two…
Evolutionary game theory has been an important tool for describing economic and social behaviour for decades. Approximate mean value equations describing the time evolution of strategy concentrations can be derived from the players'…
This survey treats the problem of ruin in a risk model when assets earn investment income. In addition to a general presentation of the problem, topics covered are a presentation of the relevant integro-differential equations, exact and…
The main objective of this paper is to develop a martingale-type solution to optimal consumption--investment choice problems ([Merton, 1969] and [Merton, 1971]) under time-varying incomplete preferences driven by externalities such as…
Turnpike theorems state that if an investor's utility is asymptotically equivalent to a power utility, then the optimal investment strategy converges to the CRRA strategy as the investment horizon tends to infinity. This paper aims to…
In standard quantum theory, time is not an observable. It enters as a parameter in the Schr\"odinger equation, but there is no measurement operator associated to it. Nevertheless, one may take an operational viewpoint and regard time as the…
We demonstrate that the gain/loss asymmetry observed for stock indices vanishes if the temporal dependence structure is destroyed by scrambling the time series. We also show that an artificial index constructed by a simple average of a…
In recent times we hear increasingly often about cyber attacks on various commercial and strategic sites that manage to escape any defense. In this article, we model such attacks on networks via stochastic processes and predict the time of…
This paper considers nonlinear regular-singular stochastic optimal control of large insurance company. The company controls the reinsurance rate and dividend payout process to maximize the expected present value of the dividend pay-outs…
This paper studies a continuous-time portfolio selection problem under a general distribution of random risk aversion (RRA). We provide a complete characterization of all deterministic equilibrium strategies in closed form. Our results show…
A continuous-time consumption-investment model with constraint is considered for a small investor whose decisions are the consumption rate and the allocation of wealth to a risk-free and a risky asset with logarithmic Brownian motion…
We run experimental asset markets to investigate the emergence of excess trading and the occurrence of synchronised trading activity leading to crashes in the artificial markets. The market environment favours early investment in the risky…
The time value of money is a critical factor not only in risk analysis, but also in insurance and financial applications. In this paper, we consider a special class of set-valued risk statistics by introducing the time value of money. In…
This paper investigates the financial economics of simple periodic systems. Well-established financial procedures appear to be complicated, and lead to partially biased results. Probability theory is applied, and the focus is on the…