Related papers: Risk aversion in financial decisions: A nonextensi…
This article studies a portfolio optimization problem, where the market consisting of several stocks is modeled by a multi-dimensional jump-diffusion process with age-dependent semi-Markov modulated coefficients. We study risk sensitive…
Financial markets are influenced by human behavior that deviates from rationality due to cognitive biases. Traditional reinforcement learning (RL) models for financial decision-making assume rational agents, potentially overlooking the…
Understanding the affective, cognitive and behavioural processes involved in risk taking is essential for treatment and for setting environmental conditions to limit damage. Using Temporal Difference Reinforcement Learning (TDRL) we…
It is essential to incorporate the impact of investor behavior when modeling the dynamics of asset returns. In this paper, we reconcile behavioral finance and rational finance by incorporating investor behavior within the framework of…
We propose a mathematical model of momentum risk-taking, which is essentially real-time risk management focused on short-term volatility of stock markets. Its implementation, our fully automated momentum equity trading system presented…
We argue that contrary to recent suggestions, non-extensive statistical mechanics has no relevance for inhomogeneous systems of particles interacting by short-range potentials. We show that these systems are perfectly well described by the…
The global financial crisis in 2007-2009 demonstrated that systemic risk can spread all over the world through a complex web of financial linkages, yet we still lack fundamental knowledge about the evolution of the financial web. In…
Strategies aimed at reducing the negative effects of long-term uncertainty and risk are common in biology, game theory, and finance, even if they entail a cost in terms of mean benefit. Here, we focus on the single mutant's invasion of a…
In this paper we present a Boltzmann-type kinetic approach to the modelling of road traffic, which includes control strategies at the level of microscopic binary interactions aimed at the mitigation of speed-dependent road risk factors.…
In this paper, we consider a risk-averse decision problem for controlled-diffusion processes, with dynamic risk measures, in which multiple risk-averse agents choose their decisions in such a way to minimize their individual accumulated…
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…
In this paper, we investigate risk minimization problem of derivatives based on non-tradable underlyings by means of dynamic g-expectations which are slight different from conditional g-expectations. In this framework, inspired by [1] and…
Stochastic multi-armed bandits solve the Exploration-Exploitation dilemma and ultimately maximize the expected reward. Nonetheless, in many practical problems, maximizing the expected reward is not the most desirable objective. In this…
As soon as one accepts to abandon the zero-risk paradigm of Black-Scholes, very interesting issues concerning risk control arise because different definitions of the risk become unequivalent. Optimal hedges then depend on the quantity one…
This paper deals with discrete-time Markov control processes on a general state space. A long-run risk-sensitive average cost criterion is used as a performance measure. The one-step cost function is nonnegative and possibly unbounded.…
Systemic financial risk refers to the simultaneous failure or destabilization of multiple financial institutions, often triggered by contagion mechanisms or common exposures to shocks. In this paper, we present a dynamical model of bank…
The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference…
This work suggests the estimation method developed in relation to the position of the robotic system (RS) operator, showing his degree of risk proneness. The base models are: Hurwitz pessimism/optimism criterion and decision trees. The…
In general, underestimation of risk is something which should be avoided as far as possible. Especially in financial asset management, equity risk is typically characterized by the measure of portfolio variance, or indirectly by quantities…
Starting from the global financial crisis to the more recent disruptions brought about by geopolitical tensions and public health crises, the volatility of risk in financial markets has increased significantly. This underscores the…