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Bretscher, Lorenzo; Malkhozov, Aytek; Tamoni, Andrea - 2021

augmented with anticipated shocks. Accounting for agents' expectations atthe business cycle horizon results in aggregate risk … aggregate risk …

Persistent link: https://www.econbiz.de/10012643121

Resolving persistent uncertainty by self-organized consensus to mitigate market bubbles

Sornette, Didier; Andraszewicz, Sandra; Murphy, Ryan O.; … - 2016

We propose a new paradigm to study coordination in complex social systems, such as financial markets, that accounts for fundamental uncertainty. This new context has features from prediction markets that have been shown previously to mitigate price bubbles in classical asset market experiments....

Persistent link: https://www.econbiz.de/10011514493

Ambiguity and the home currency bias

Ulrych, Urban; Vasiljević, Nikola - 2020 - This Version: August 2020

This paper addresses the question of optimal currency exposure for a risk-and-ambiguity-avers international investor. A …

Persistent link: https://www.econbiz.de/10012271218

Quantum decision theory in simple risky choices

Favre, Maroussia; Wittwer, Amrei; Heinimann, Hans Rudolf; … - 2016

Quantum decision theory (QDT) is a recently developed theory of decision making based on the mathematics of Hilbert spaces, a framework known in physics for its application to quantum mechanics. This framework formalizes the concept of uncertainty and other effects that are particularly manifest...

Persistent link: https://www.econbiz.de/10011514496

Taking ambiguity to reality : robust agents cannot trust the data too much

Trojani, Fabio; Wiehenkamp, Christian; Wrampelmeyer, Jan - 2011

our robust approach. Time-varying features can also produce large biases in estimated equilibrium risk or ambiguity premia …

Persistent link: https://www.econbiz.de/10009273101

Trapped in the "zero-risk" society and how to break free

Sornette, Didier; Cauwels, Peter - 2020

We live in a ‘zero-risk society', characterized by a culture that is obsessed with controlling and removing any … known unknowns but even unknown unknowns. This may sound like a paradox, but, bold risk-taking is an essential ingredient of … attribute this to five deeper causes: (i) risk aversion as a consequence of increasing wealth and aging; (ii) increasing …

Persistent link: https://www.econbiz.de/10012271226

Divergence and the price of uncertainty

Schneider, Paul; Trojani, Fabio - 2015 - This Version: November 23, 2015

Realized divergence gauges the distinct realized moments associated with time-varying uncertainty and is tradeable with divergence swaps engineered from delta-hedged option portfolios. Consistently with established notions of symmetry in arbitrage-free option markets, implied divergence...

Persistent link: https://www.econbiz.de/10011507861

Model uncertainty, recalibration, and the emergence of delta-vega hedging

Herrmann, Sebastian; Muhle-Karbe, Johannes - 2016

We study option pricing and hedging with uncertainty about a Black-Scholes reference model which is dynamically recalibrated to the market price of a liquidly traded vanilla option. For dynamic trading in the underlying asset and this vanilla option, delta-vega hedging is asymptotically optimal...

Persistent link: https://www.econbiz.de/10011506357

Model uncertainty and scenario aggregation

Cambou, Mathieu; Filipović, Damir - 2014

the definition of five fundamental criteria that serve as a basis for our method. Standard risk measures, such as value-at-risk …

Persistent link: https://www.econbiz.de/10010412678

Hedging with small uncertainty aversion

Herrmann, Sebastian; Muhle-Karbe, Johannes; Seifried, … - 2016

We study the pricing and hedging of derivative securities with uncertainty about the volatility of the underlying asset. Rather than taking all models from a prespecified class equally seriously, we penalise less plausible ones based on their "distance" to a reference local volatility model. In...

Persistent link: https://www.econbiz.de/10011410718

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