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Dynamic Hedging in Incomplete Markets: A Simple Solution
Basak, Suleyman; Chabakauri, Georgy - C.E.P.R. Discussion Papers - 2011
Despite much work on hedging in incomplete markets, the literature still lacks tractable dynamic hedges in plausible environments. In this article, we provide a simple solution to this problem in a general incomplete-market economy in which a hedger, guided by the traditional minimum-variance...
Persistent link: https://www.econbiz.de/10009024486
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Dynamic Mean-Variance Asset Allocation
Basak, Suleyman; Chabakauri, Georgy - C.E.P.R. Discussion Papers - 2009
Mean-variance criteria remain prevalent in multi-period problems, and yet not much is known about their dynamically optimal policies. We provide a fully analytical characterization of the optimal dynamic mean-variance portfolios within a general incomplete-market economy, and recover a simple...
Persistent link: https://www.econbiz.de/10005656376
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Divergence and the price of uncertainty
Schneider, Paul; Trojani, Fabio - 2015 - This Version: November 23, 2015
Realized divergence gauges the distinct realized moments associated with time-varying uncertainty and is tradeable with …-free option markets, implied divergence systematically decomposes the price of uncertainty into the contributions of distinct …
Persistent link: https://www.econbiz.de/10011507861
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Non-implementability of Arrow-Debreu equilibria by continuous trading under knightian uncertainty
Riedel, Frank; Beißner, Patrick - 2014
-lived securities. We show that this result generically fails if there is Knightian uncertainty in the volatility. Implementation is …
Persistent link: https://www.econbiz.de/10010411561
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Irreversibility in Economics
Perrings, Charles; Brock, William - In: Annual Review of Resource Economics 1 (2009) 1, pp. 219-238
connect them to arguments in the parallel literatures on sustainability and uncertainty. …
Persistent link: https://www.econbiz.de/10010614164
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Precaution under mixed uncertainty: Implications for environmental management
Zemel, Amos - In: Resource and Energy Economics 34 (2012) 2, pp. 188-197
A model of pollution control subject to two types of uncertainty is presented. First, the natural decay of the … pollution stock follows stochastic dynamics that drives a diffusion pollution process (“stochastic uncertainty”). Moreover, the … at some uncertain future time (“event uncertainty”). The model admits an explicit and simple dynamic characterization of …
Persistent link: https://www.econbiz.de/10011043419
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A large-scale optimization model for replicating portfolios in the life insurance industry
Adelmann, Maximilian; Fernandez-Arjona, Lucio; Mayer, János - 2016
Replicating portfolios have recently emerged as an important tool in the life insurance industry, used for the valuation of companies' liabilities. This paper presents a replicating portfolio (RP) model for approximating life insurance liabilities as closely as possible. We minimize the L1 error...
Persistent link: https://www.econbiz.de/10011515725
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A Fuzzy Goal Programming model for solving aggregate production-planning problems under uncertainty: A case study in a Brazilian sugar mill
Silva, Aneirson Francisco da; Marins, Fernando Augusto Silva - In: Energy Economics 45 (2014) C, pp. 196-204
This paper proposes a Fuzzy Goal Programming model (FGP) for a real aggregate production-planning problem. To do so, an application was made in a Brazilian Sugar and Ethanol Milling Company. The FGP Model depicts the comprehensive production process of sugar, ethanol, molasses and derivatives,...
Persistent link: https://www.econbiz.de/10010939434
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Controlling portfolio skewness and kurtosis without directly optimizing third and fourth moments
Kim, Woo Chang; Fabozzi, Frank J.; Cheridito, Patrick; … - In: Economics Letters 122 (2014) 2, pp. 154-158
uncertainty sets are properly constructed, robust portfolios based on the worst-case approach within the mean–variance setting …
Persistent link: https://www.econbiz.de/10010743694
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Composition of robust equity portfolios
Kim, Jang Ho; Kim, Woo Chang; Fabozzi, Frank J. - In: Finance Research Letters 10 (2013) 2, pp. 72-81
Robust portfolios resolve the sensitivity issue identified as a concern in implementing mean–variance analysis. Because robust approaches are not widely used in practice due to a limited understanding regarding the portfolios constructed from these methods, we present an analysis of the...
Persistent link: https://www.econbiz.de/10010679285