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Heterogeneous beliefs among market participants can lead to questionable speculative trading that goes beyond any risk … pricing for ambiguous contracts, without compromising legitimate risk-hedging activities. While Arrow-Debreu equilibria …
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This paper introduces a (coherent) risk measure that describes the uncertainty of the model (represented by a … representation is obtained that gives a connection to both the expected loss of the financial position and its average value-at-risk … problems reveals examples of extreme sensitivity of optimal portfolios to model parameters and the choice of risk measure. …
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popular Epstein-Zin-Weil recursive preferences as special cases. Besides providing a model uncertainty rationale to these risk …-Zin-Weil preferences yield comparable market prices of risk for given detection error probabilities. …
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This paper addresses the question of optimal currency exposure for a risk-and-ambiguity-avers international investor. A …
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We theoretically and empirically study large-scale portfolio allocation problems when transaction costs are taken into account in the optimization problem. We show that transaction costs act on the one hand as a turnover penalization and on the other hand as a regularization, which shrinks the...
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