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Sufana, R.; Gourieroux, C. - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003

This paper reveals that the class of affine term structure models introduced by Duffie and Kan (1996) is much larger than it has been usually considered in the literature. We study "fundamental" risk factors, which represent multivariate risk aversion of the consumer volatility matrix of the...

Persistent link: https://www.econbiz.de/10005857969

Aversion Analysis

Allard, Marie; Bronsard, Camille; Gourieroux, Christian - Institut für Schweizerisches Bankwesen <Zürich>; … - 2002

Due to their underlying assumptions, the standard concepts of risk aversion and preference for the present are generally defined separately and represented by scalar measures, and this implies many shortcomings. More specifically, if measured by a scalar, the risk aversion remains unchanged,...

Persistent link: https://www.econbiz.de/10005858445

Two Paradigms and Nobel Prizes in Economics : A Contradiction or Coexistence?

Levy, Haim; De Giorgi, Enrico; Hens, Thorsten - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003

-Variance analysis and the Capital Asset Pricing Model (CAPM). In the year 2002, Kahneman won the Nobel Prize in Economics for the … development of Prospect Theory. Can these two apparently contradictory paradigms coexist? In deriving the CAPM, Sharpe, Lintner … wealth rather than total wealth contradicts EU theory. The subjective distortion of probabilities violates the CAPM …

Persistent link: https://www.econbiz.de/10005858578

Equilibrium asset pricing with time-varying pessimism

Sbuelz, Alessandro; Trojani, Fabio - Institut für Schweizerisches Bankwesen <Zürich>; … - 2002

We study the equilibrium pricing sects of a sentiment for pessimism. Pessimism has the form of Knightian model uncertainty aversion for a neighborhood of indistinguishable model specifications that are constrained in their relative entropy from a given reft ence model. We fully characterise the...

Persistent link: https://www.econbiz.de/10005858860

On Consequences of State Dependent Preferences for the Pricing of Financial Assets

Danthine, Jean-Pierre; Donaldson, John B.; Giannikos, … - Institut für Schweizerisches Bankwesen <Zürich>; … - 2002

This paper introduces state dependent utility into the standard Mehra and Prescott (1985) economy by allowing the representative agents coefficient of relative risk aversion to vary with the underlying economys growth rate. Existence of equilibrium is proved and its asymptotic properties...

Persistent link: https://www.econbiz.de/10005859325

Robust Mean-Variance Portfolio Selection

Perret-Gentil, Cédric; Victoria-Freser, Maria-Pia - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

This paper investigates model risk issues in the context of mean-variance portfolio selection. We analytically and numerically show that, under model misspeciﬁcation, the use of statistically robust estimates instead of the widely used classical sample mean and covariance is highly beneﬁcial...

Persistent link: https://www.econbiz.de/10005858020

Evolutionary Portfolio Selection with Liquidity Shocks

De Giorgi, Enrico - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

The wealth dynamics of insurance companies strongly depends on the success of their investment strategies, but also on liquidity shocks which occur during unfavorable years, when indemnities to be paid to the clients exceed collected premia. An investment strategy that does not take liquidity...

Persistent link: https://www.econbiz.de/10005858142

Ratchet vs Blase Investors and Asset Markets

St-Amour, Pascal - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

This paper proposes a new wealth-dependent utility function for the inter-temporal consumption and portfolio problem, in which the subsistance (bliss) con-sumption level is a function of wealth. Ratchet effects obtain when higher wealth in-creases the subsistance consumption level; blas´...

Persistent link: https://www.econbiz.de/10005858307

Survival of the Fittest on Wall Street

Hens, Thorsten; SchenkHoppe, Klaus Reiner - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

This paper studies an application of a Darwinian theory of portfolioselection to stocks listed in the Dow Jones Industrial Average (DJIA).We analyze numerically the long-run outcome of the competition ofﬁx-mix portfolio rules in a stock market with actual DJIA dividends.In the model seemingly...

Persistent link: https://www.econbiz.de/10005858308

Modelling Dynamic Portfolio Credit Risk

Rogge, Ebbe; Schoenbucher, Phillip J. - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003

In this paper we present a model to price and hedge basket credit derivatives andcollateralised loan obligation. Based upon the copula-approach by Schönbucher and Schubert (2001) the model allows a speciﬁcation of the joint dynamics of credit spreads and default intensities, including a...

Persistent link: https://www.econbiz.de/10005858551