robust model for small amounts of uncertainty and analyze the effect of robustness on optimal trading strategies and … liquidation costs. In particular, in our model ambiguity aversion is observationally equivalent to increased risk aversion. This …

technologies under uncertainty. Specifically, given two technologies, one with lower costs at present, but the other with greater … uncertainty in the returns to R&D, how should one allocate the R&D budget? We develop a multi-stage stochastic dynamic programming … variance in the uncertainty in returns to R&D and with the skewness of the uncertainty. We also present an illustrative case …

setting, an increase in uncertainty about future shocks causes significant contractions in the economy and may lead to non … outcomes. Fluctuations in uncertainty and the zero lower bound help our model match the unconditional and stochastic volatility …

manage systematic mortality risks, namely self-insurance and risk transfer to purchasers of the annuity products. We … demonstrate that self-insurance leads to high loadings, so that households offered a choice would favor the risk transfer scheme …

This paper studies the pricing of volatility risk using the first-order conditions of a long-term equity investor who …

portfolio, one for market risk and one for credit risk. Similar approaches are common in banks’ internal models for economic … capital. Although it is known that joint market and credit risk of certain investments can be larger than the sum of risks … holdings or CDS portfolios – are also affected. There are realistic conditions under which credit risk (represented by ratings …

probabilities, on reduced-form credit risk stress testing. This type of uncertainty is omnipresent in most macroeconomic stress …In this paper we study the impact of model uncertainty, which occurs when linking a stress scenario to default … testing applications due to short time series for banks' portfolio risk parameters and highly collinear macroeconomic …

This paper deals with stress tests for credit risk and shows how exploiting the discretion when setting up and … probabilities are less exposed to model and estimation risk. In addition, the risk horizon over which the stress default … extensive robustness checks for model-based credit risk stress tests. …

While the traditional view of financial innovation emphasizes the risk sharing role of new financial assets, belief …. This paper investigates the effect of financial innovation on portfolio risks in an economy when both the risk sharing and … the possibilities for risk sharing. My main result shows that financial innovation also always increases the speculative …

options in defined contribution retirement plans. We document large differences in realized TDF returns and risk profiles … reflects optimal risk-taking by fund families with low market share, especially those entering the market after 2006. Using … plan-level data, we find little evidence that 401(k) plan sponsors match the risk profile of the TDFs in their plans to the …