Related papers: Risk aversion in financial decisions: A nonextensi…
By treating the financial market as a thermodynamic system, we establish a one-to-one correspondence between thermodynamic variables and economic quantities. Measured by the expected loss under the worst-case scenario, financial risk caused…
In the framework of risk management, for the study of the sensitivity of pricing and hedging in stochastic financial models to changes of parameters and to perturbations of the stock prices, we propose an error calculus which is an…
We represent preferences that exhibit absolute or relative attitudes towards ambiguity without assuming convexity of preferences. Our analysis is motivated by the recent experimental evidence by Baillon and Placido (2019) indicating that…
We derive a closed-form expression capturing the degree of Relative Risk Aversion (RRA) of investors for non-"fair" lotteries. We argue that our formula is superior to earlier methods that have been proposed, as it is a function of only…
We develop a structural econometric model to capture the decision dynamics of human evaluators on an online micro-lending platform, and estimate the model parameters using a real-world dataset. We find two types of biases in gender,…
A Value-at-Risk based model is proposed to compute the adequate equity capital necessary to cover potential losses due to operational risks, such as human and system process failures, in banking organizations. Exploring the analogy to a…
Equilibrium properties in statistical physics are obtained by computing averages with respect to Boltzmann-Gibbs measures, sampled in practice using ergodic dynamics such as the Langevin dynamics. Some quantities however cannot be computed…
Recent years have seen an increased level of interest in pricing equity options under a stochastic volatility model such as the Heston model. Often, simulating a Heston model is difficult, as a standard finite difference scheme may lead to…
We deal with the calculation of price sensitivities for stochastic volatility models. General forms for the dynamics of the underlying asset price and its volatility are considered. We make use of the chaotic (or Malliavin) calculus to…
This paper deals with a Boltzmann-type kinetic model describing the interplay between vehicle dynamics and safety aspects in vehicular traffic. Sticking to the idea that the macroscopic characteristics of traffic flow, including the…
We briefly review statistical models for the probability distribution of money developed in the econophysics literature since the late 1990s. In these models, economic transactions are modeled as random transfers of money between the agents…
A risk analyst assesses potential financial losses based on multiple sources of information. Often, the assessment does not only depend on the specification of the loss random variable but also various economic scenarios. Motivated by this…
In this paper long-run risk sensitive optimisation problem is studied with dyadic impulse control applied to continuous-time Feller-Markov process. In contrast to the existing literature, focus is put on unbounded and non-uniformly ergodic…
We propose a novel approach to infer investors' risk preferences from their portfolio choices, and then use the implied risk preferences to measure the efficiency of investment portfolios. We analyze a dataset spanning a period of six…
In this work we study the individual strategies carried out by agents undergoing transactions in wealth exchange models. We analyze the role of risk propensity in the behavior of the agents and find a critical risk, such that agents with…
Financial volatility risk and its relation to a business cycle-related intrinsic time is addressed through a multiple round evolutionary quantum game equilibrium leading to turbulence and multifractal signatures in the financial returns and…
A functional risk curve gives the probability of an undesirable event as a function of the value of a critical parameter of a considered physical system. In several applicative situations, this curve is built using phenomenological…
One the one hand, rough volatility has been shown to provide a consistent framework to capture the properties of stock price dynamics both under the historical measure and for pricing purposes. On the other hand, market price of volatility…
There is growing interest in the role of sentiment in economic decision-making. However, most research on the subject has focused on positive and negative valence. Conviction Narrative Theory (CNT) places Approach and Avoidance sentiment…
Based on criteria of mathematical simplicity and consistency with empirical market data, a model with volatility driven by fractional noise has been constructed which provides a fairly accurate mathematical parametrization of the data.…