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...

Although the benefits of genetically modified (GM) crops have been well documented, how do farmers manage the risk of new technology in the early stages of technology adoption has received less attention. We compare the total factor productivity (TFP) of cotton to other major crops (wheat, rice,...

We establish 16 good practice principles for modelling defined contribution pension plans. These principles cover the following issues: model specification and calibration; modelling quantifiable uncertainty; modelling member choices; modelling member characteristics, such as occupation and...

Technological progress in recent years has made new methods available for making forecasts in a variety of areas. We examine the success of ex-ante stock market forecasts of three major stock market indices, i.e., the German Stock Market Index (DAX), the Dow Jones Industrial Index (DJI), and the...

This paper investigates the role of children in explaining the life-cycle pattern of consumption (which is hump-shaped since it is higher in the middle of life and lower at the beginning and end of life). Unlike previous studies, a true panel of U.K. households was exploited to investigate...

Recent studies on decision analytics frequently refer to the topic of behavioral decision making (BDM), which focuses on behavioral components of decision analytics. This paper provides a critical review of literature for re-examining the relations between BDM and classical decision theories in...

Because of the advancement of electronic commerce, online shopping has emerged, merging commercial and social activities and enhancing the social presence and value of the online environment. To improve the understanding of the changes in the consumer behavior during the COVID-19 pandemic, this...

The purpose of this paper is to describe a study that was designed to determine to what extent subjective and objective measures of financial knowledge moderate the relationship between an investor’s financial risk tolerance and demographic factors thought to be important descriptors of an...

Within the framework of a laboratory experiment, we examine to what extent algorithm aversion acts as an obstacle in the establishment of robo advisors. The subjects had to complete diversification tasks. They could either do this themselves or they could delegate them to a robo advisor. The...

This paper applies the mean-variance portfolio optimization (PO) approach and the stochastic dominance (SD) test to examine preferences for international diversification versus domestic diversification from American investors’ viewpoints. Our PO results imply that the domestic diversification...