In the United States, exchange-traded funds can defer capital gains taxes of their investors by taking advantage of a legal loophole. To quantify the impact of this tax loophole on investor portfolios, we study a rank-dependent expected utility model. We develop an approximation formula for the...

Economic fallouts from COVID-19 have been unprecedented across all industries, with a handful of exceptions. The present study attempts to capture the impact of dividend distribution tax elimination, introduced through the Indian Finance Act 2020, on corporate dividend behavior in India. It...

The paper compares portfolio optimization with the Second-Order Stochastic Dominance (SSD) constraints with mean-variance and minimum variance portfolio optimization. As a distribution-free decision rule, stochastic dominance takes into account the entire distribution of return rather than some...

In this paper, we deal with the possibility of using econophysics concepts in dynamic portfolio optimization. The main idea of the research is that combining different methodological aspects in portfolio selection can enhance portfolio performance over time. Using data on CESEE stock market...

In this article, inspired by Shi et al., we investigate the optimal portfolio selection with one risk-free asset and one risky asset in a multiple period setting under the cumulative prospect theory (CPT) risk criterion. Compared with their study, our novelty is that we consider a stochastic...

This paper features an analysis of the effectiveness of a range of portfolio diversification 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, in...

The recent financial crisis triggered the greatest recession since the 1930s and had a devastating impact on households’ wealth and on their capacity to reduce their indebtedness. In the aftermath, it became clear that there is significant room for improvement in property risk management....

In this paper, we demonstrate the superiority of vine copulas over conventional copulas when modeling the dependence structure of a credit portfolio. We show statistical and economic implications of replacing conventional copulas by vine copulas for a subportfolio of the Euro Stoxx 50 and the...

The impact of a stress scenario of default events on the loss distribution of a credit portfolio can be assessed by determining the loss distribution conditional on these events. While it is conceptually easy to estimate loss distributions conditional on default events by means of Monte Carlo...

This paper examines a simple basis risk model based on correlated geometric Brownian motions. We apply quadratic criteria to minimize basis risk and hedge in an optimal manner. Initially, we derive the Föllmer–Schweizer decomposition for a European claim. This allows pricing and hedging under...