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Decision making in incomplete markets with ambiguity : a case study of a gas field acquisition

Zhao, Lin; Wijnbergen, Sweder van - 2014

We apply utility indifference pricing to solve a contingent claim problem, valuing a connected pair of gas fields where the underlying process is not standard Geometric Brownian motion and the assumption of complete markets is not fulfilled. First, empirical data are often characterized by...

Persistent link: https://www.econbiz.de/10010465169

Optimal search with costly recall

Janssen, Maarten C. W.; Parakhonyak, Alexei - 2008

This paper builds a consumer search model where the cost of going back to stores already searched is explicitly taken into account. We show that the optimal search rule under costly recall is very different from the optimal search rule under perfect recall. Under costly recall, the optimal...

Persistent link: https://www.econbiz.de/10011373816

Intergenerational sharing of unhedgeable inflation risk

Chen, Damiaan H. J.; Beetsma, Roel; Wijnbergen, Sweder van - 2022 - This version: November 16, 2022

We explore how members of a collective pension scheme can share inflation risks in the absence of suitable financial market instruments. Using intergenerational risk sharing arrangements, risks can be allocated better across the various participants of a collective pension scheme than would be...

Persistent link: https://www.econbiz.de/10013460026

Starting an R&D project under uncertainty

Dobbelaere, Sabien; Luttens, Roland Iwan; Peters, Bettina - 2010

We study a two-stage R&D project with an abandonment option. Two types of uncertainty influence the decision to start R …&D. Demand uncertainty is modelled as a lottery between a proportional increase and decrease in demand. Technical uncertainty is … modelled as a lottery between a decrease and increase in the cost to continue R&D. We relate differences in uncertainty to …

Persistent link: https://www.econbiz.de/10011378299

Inherent efficiency, security markets, and the pricing of investment strategies

Zou, Liang - 2000

This paper applies the dichotomous theory of choice by Zou (2000a) tothe analysis of investmentstrategies and security markets. Issues concerning individualoptimality, (approximate) arbitrage,capital market equilibrium, and Pareto efficiency are studied undervarious market conditions. Among the...

Persistent link: https://www.econbiz.de/10011304380

Risk aversion under preference uncertainty

Kräussl, Roman; Lucas, André; Siegmann, Adriaan Hendrik - 2010

their risk aversion parameter invest less in risky assets than wealthy investors with identical risk aversion uncertainty. …

Persistent link: https://www.econbiz.de/10011382430

Educational choice, initial wage and wage growth

Mazza, Jacopo; Ophem, Hans van - 2020

We investigate the major choice of college graduates where we make choice dependent on expected initial wages and expected wage growth per major. We build a model that allows us to estimate these factors semiparametrically and that corrects for selection bias. We estimate the model on the...

Persistent link: https://www.econbiz.de/10012228687

Down-side risk metrics as portfolio diversification strategies across the GFC

Allen, David E.; McAleer, Michael; Powell, Robert; … - 2015

This paper features an analysis of the effectiveness of a range of portfolio diversi cation strategies, with a focus on down-side risk metrics, as a portfolio diversification strategy in a European market context. We apply these measures to a set of daily arithmetically compounded returns on a...

Persistent link: https://www.econbiz.de/10011376286

Analytic decision rules for financial stochastic programs

Siegmann, Adriaan Hendrik; Lucas, André - 2000 - This version: May 1, 2000

Contemporary financial stochastic programs typically involve a trade-offbetween return and (downside)-risk. Using stochastic programming we characterize analytically (rather than numerically) the optimal decisions that follow from characteristic single-stage and multi-stage versions of such...

Persistent link: https://www.econbiz.de/10011303296

Spectrally-corrected estimation for high-dimensional Markowitz mean-variance optimization

Bai, Zhidong; Li, Hua; McAleer, Michael; Wong, Wing Keung - 2016

This paper considers the portfolio problem for high dimensional data when the dimension and size are both large.We analyze the traditional Markowitz mean-variance (MV) portfolio by large dimension matrix theory, and find the spectral distribution of the sample covariance is the main factor to...

Persistent link: https://www.econbiz.de/10011456708

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