Experimental studies in behavioral finance historically have confirmed that subjects are highly influenced by reference points when making economic decisions. A recent study by Baucells, Weber and Welfens (2011) analyzed the dynamics of reference price formation using experimental methods with...

Although various asymmetric measures of market risk have been shown to be priced factors for the broader equity market, life insurer realized equity returns include a much larger premium for bearing downside risk, even after controlling for firm characteristics and other measures of risk....

This paper proposes a variant application of the Merton distance-to-default model by employing implied volatility and implied a cost of capital to forecast defaults. The proposed model's results are compared with predictions obtained from three popular models in different setups. We find that...

This paper proposes a variant application of the Merton distance-to-default model by employing implied volatility and implied cost of capital to predict defaults. The proposed model's results are compared with predictions obtained from three popular models in different setups. We find that our...

Dynamic enterprise risk management (ERM) entails holistic decision-making for critical corporate functions such as capital budgeting and risk management. The interplay across business divisions, however, is complicated due to their natural interactions through the shared and dependent risk...

Many important decision and risk analysis problems are complicated by dependencies between input variables. In such cases, standard one-variable-at-a-time sensitivity analysis methods are typically eschewed in favor of fully probabilistic, or n-way, analysis techniques which simultaneously model...

Abstract Modeling the dependence between uncertainties in decision and risk analyses is an important part of the problem structuring process. We focus on situations where correlated uncertainties are discrete, and extend the concept of the copula-based approach for modeling correlated continuous...

The studies of behavioral finance show that the cognitive bias plays an important role in investors' decision-making process. In this paper, based on the robust theory and prospect theory, a robust multi-period portfolio considering investors' behavioral factors is constructed, which features...