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We assume that an agent's rate of consumption is {\it ratcheted}; that is, it forms a non-decreasing process. Given the rate of consumption, we act as financial advisers and find the optimal investment strategy for the agent who wishes to…

This paper discusses the valuation of credit default swaps, where default is announced when the reference asset price has gone below certain level from the last record maximum, also known as the high-water mark or drawdown. We assume that…

Derivative pricing is about cash flow discounting at the riskfree rate. This teaching has lost its meaning post the financial crisis, due to the addition of extra value adjustments (XVA), which also made derivatives pricing and valuation a…

Assessing the costs of climate change is essential to finding efficient pathways for the transition to a net-zero emissions economy, which is necessary to stabilise global temperatures at any level. In evaluating the benefits and costs of…

It is well known that the minimal superhedging price of a contingent claim is too high for practical use. In a continuous-time model uncertainty framework, we consider a relaxed hedging criterion based on acceptable shortfall risks.…

This paper investigates a novel behavioral feature of recursive preferences: aversion to risks that persist over time, or simply \textit{correlation aversion}. Greater persistence provides information about future consumption but reduces…

This paper studies the stochastic modeling of market drawdown events and the fair valuation of insurance contracts based on drawdowns. We model the asset drawdown process as the current relative distance from the historical maximum of the…

In this paper, we aims to state some proprieties of willingness to pay (WTP) for partial risk reduction and links with insurance within the dual theory of decision. In the case of partial reduction, we get as Langlais (2005) that a…

A prominent theme in behavioural contract theory is the study of present-biased agents represented through quasi-hyperbolic discounting. In a model of competitive credit provision, we study an alternative to this framework in which the…

This paper explores the optimal policy for using an allocated carbon emission budget over time with the objective to maximize profit, by explicitly taking into account present-biased preferences of decision-makers, accounting for…

For his work in the economics of climate change, Professor William Nordhaus was a co-recipient of the 2018 Nobel Memorial Prize for Economic Sciences. A core component of the work undertaken by Nordhaus is the Dynamic Integrated model of…

Climate change communication is crucial to raising awareness and motivating action. In the context of breaching the limits set out by the Paris Agreement, we argue that climate scientists should move away from point estimates and towards…

Despite much scientific evidence, a large fraction of the American public doubts that greenhouse gases are causing global warming. We present a simulation model as a computational test-bed for climate prediction markets. Traders adapt their…

This paper examines the pricing of short-term and long-term dynamic network risk in the cross-section of stock returns. Stocks with high sensitivities to dynamic network risk earn lower returns. We rationalize our finding with economic…

This paper considers the pricing of equity-linked life insurance contracts with death and survival benefits in a general model with multiple stochastic risk factors: interest rate, equity, volatility, unsystematic and systematic mortality.…

When decision makers evaluate a sequence of rewards, they may pay more attention to larger rewards and, given attention is limited, less attention to smaller rewards. They may also become less attentive to each reward when attention is…

This article presents a new model for valuing a credit default swap (CDS) contract that is affected by multiple credit risks of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset…

In this paper we study the valuation problem of an insurance company by maximizing the expected discounted future dividend payments in a model with partial information that allows for a changing economic environment. The surplus process is…

This paper studies natural disasters and the psychological costs of climate change. It presents what we believe to be the first evidence that higher temperature variability and not a higher level of temperature is what predicts natural…

Stochastic dividend discount models (Hurley and Johnson, 1994 and 1998, Yao, 1997) present expressions for the expected value of stock prices when future dividends evolve according to some random scheme. In this paper we try to offer a more…