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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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Asset Pricing under Rational Learning about Rare Disasters
Koulovatianos, Christos; Wieland, Volker - C.E.P.R. Discussion Papers - 2011
This paper proposes a new approach for modeling investor fear after rare disasters. The key element is to take into account that investors' information about fundamentals driving rare downward jumps in the dividend process is not perfect. Bayesian learning implies that beliefs about the...
Persistent link: https://www.econbiz.de/10009201120
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Strategic Asset Allocation in Money Management
Basak, Suleyman; Makarov, Dmitry - C.E.P.R. Discussion Papers - 2011
Money managers behave strategically when competing for fund flows within relatively small groups. We study strategic interaction between two risk-averse managers in continuous time, characterizing analytically their unique equilibrium dynamic investments. Driven by chasing and contrarian...
Persistent link: https://www.econbiz.de/10009144728
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Modelling Negotiated Decision Making: A Multilateral, Multiple Issues, Non-Cooperative Bargaining Model with Uncertainty
Carraro, Carlo; Sgobbi, Alessandra - C.E.P.R. Discussion Papers - 2007
most economic situations, uncertainty crucially affects also bargaining processes. Therefore, in our analysis, we introduce … uncertainty over the size of the pies to be shared and assess the impacts on players’ strategic behaviour. Our results confirm … that uncertainty crucially affects players’ behaviour and modify the likelihood of a self-enforcing agreement to emerge …
Persistent link: https://www.econbiz.de/10005791640
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A Stochastic Multiple Players Multi-Issues Bargaining Model for the Piave River Basin
Carraro, Carlo; Sgobbi, Alessandra - C.E.P.R. Discussion Papers - 2007
). Exogenous uncertainty over the size of the negotiated amount of water is introduced to capture the fact that water availability …
Persistent link: https://www.econbiz.de/10005791729
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Pill, Patch or Shot? Subjective Expectations and Birth Control Choice
Delavande, Adeline - C.E.P.R. Discussion Papers - 2005
When choosing a contraception method, women base their decisions on their subjective expectations about the realizations of method-related outcomes. Examples of such outcomes include getting pregnant, contracting a sexually transmitted disease (STD) or experiencing side effects. By conducting a...
Persistent link: https://www.econbiz.de/10005791196
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Portfolio Selection with Parameter and Model Uncertainty: A Multi-Prior Approach
Garlappi, Lorenzo; Uppal, Raman; Wang, Tan - C.E.P.R. Discussion Papers - 2005
In this paper, we show how an investor can incorporate uncertainty about expected returns when choosing a mean … investor is neutral to uncertainty, we consider the case where the investor has multiple priors and is averse to uncertainty … model aversion to uncertainty via a minimization over the set of priors. The multi-prior model has several attractive …
Persistent link: https://www.econbiz.de/10005791415
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Portfolio Selection with Parameter and Model Uncertainty: A Multi-Prior Approach
Garlappi, Lorenzo; Uppal, Raman; Wang, Tan - C.E.P.R. Discussion Papers - 2005
In this paper, we show how an investor can incorporate uncertainty about expected returns when choosing a mean … investor is neutral to uncertainty, we consider the case where the investor has multiple priors and is averse to uncertainty … model aversion to uncertainty via a minimization over the set of priors. The multi-prior model has several attractive …
Persistent link: https://www.econbiz.de/10005124485
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Model Misspecification and Under-Diversification
Uppal, Raman; Wang, Tan - C.E.P.R. Discussion Papers - 2002
In this Paper we develop a model of intertemporal portfolio choice where an investor accounts explicitly for the possibility of model misspecification. This work is motivated by the difficulty in estimating precisely the probability law for asset returns. Our contribution is to develop a...
Persistent link: https://www.econbiz.de/10005504745