Realized divergence gauges the distinct realized moments associated with time-varying uncertainty and is tradeable with divergence swaps engineered from delta-hedged option portfolios. Consistently with established notions of symmetry in arbitrage-free option markets, implied divergence...

We propose a Markov chain model for credit rating changes. We do not use any distributional assumptions on the asset values of the rated companies but directly model the rating transitions process. The parameters of the model are estimated by a maximum likelihood approach using historical rating...

The 1/N investment strategy, i.e. the strategy to split one’s wealth uniformly between the available investment possibilities, recently received plenty of attention in the literature. In this paper, we demonstrate that the uniform investment strategy is rational in situations where an agent is...

Dynamic programming is the essential tool in dynamic economic analysis. Problems such as portfolio allocation for individuals and optimal economic growth are typical examples. Numerical methods typically approximate the value function. Recent work has focused on making numerical methods more...

In this paper we develop a multicriteria credibilistic framework for portfolio rebalancing. We use an expected value model with fuzzy parameters considering return, risk and liquidity as key financial criteria. The transaction costs are assumed to be paid on the basis of incremental discounts...

This paper evaluates several alternative formulations for minimizing the credit risk of a portfolio of financial contracts with different counterparties. Credit risk optimization is challenging because the portfolio loss distribution is typically unavailable in closed form. This makes it...

This paper discusses a multi-objective portfolio optimization problem for practical portfolio selection in fuzzy environment, in which the return rates and the turnover rates are characterized by fuzzy variables. Based on the possibility theory, fuzzy return and liquidity are quantified by...

With the aim to measure and monitor systemic risk, we present some topological metrics for the interbank exposures and the payments system networks. The evolution of such networks is analyzed, we draw important conclusions from the systemic risk's perspective and propose a measure of...

We present a general classification of the conditions under which cognitive science, concerned e.g. with decision making, requires the use of quantum theoretical notions. The analysis is done in the frame of the mathematical approach based on the theory of quantum measurements. We stress that...

Quantum decision theory (QDT) is a recently developed theory of decision making based on the mathematics of Hilbert spaces, a framework known in physics for its application to quantum mechanics. This framework formalizes the concept of uncertainty and other effects that are particularly manifest...