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Cumulative prospect theory version with fuzzy values of outcome estimates
Uzhga-Rebrov, Oleg; Grabusts, Peter - In: Risks : open access journal 9 (2021) 4, pp. 1-16
Choosing solutions under risk and uncertainty requires the consideration of several factors. One of the main factors in choosing a solution is modeling the decision maker's attitude to risk. The expected utility theory was the first approach that allowed to correctly model various nuances of the...
Persistent link: https://www.econbiz.de/10012508716
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Prospect theory and the favorite long-shot bias in Baseball
Nutaro, James - In: Risks : open access journal 11 (2023) 5, pp. 1-11
We provide new evidence of a favorite long-shot bias for bets placed on baseball games. Our analysis uses the difference of mean run differentials as an observable proxy for the probability of a team to win. When baseball is viewed through this proxy, we see that bettors believe favorites are...
Persistent link: https://www.econbiz.de/10014334404
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Dynamic liability-driven investment under sponsor's loss aversion
Lee, Dong-Hwa; Sung, Jooho - In: Risks : open access journal 12 (2024) 2, pp. 1-14
This paper investigates a dynamic liability-driven investment policy for defined-benefit (DB) plans by incorporating the loss aversion of a sponsor, who is assumed to be more sensitive to underfunding than overfunding. Through the lens of prospect theory, we first set up a loss-aversion utility...
Persistent link: https://www.econbiz.de/10014497331
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Market equilibrium and the cost of capital with heterogeneous investment horizons
Levy, Moshe; Levy, Haim - In: Risks : open access journal 12 (2024) 3, pp. 1-16
Expected returns, variances, betas, and alphas are all non-linear functions of the investment horizon. This seems to be a fatal conceptual problem for the capital asset pricing model (CAPM), which assumes a unique common horizon for all investors. We show that under the standard assumptions, the...
Persistent link: https://www.econbiz.de/10014497444
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Automated machine learning and asset pricing
Healy, Jerome V.; Gregoriou, Andros; Hudson, Robert - In: Risks : open access journal 12 (2024) 9, pp. 1-12
We evaluate whether machine learning methods can better model excess portfolio returns compared to the standard regression-based strategies generally used in the finance and econometric literature. We examine 17 benchmark factor model specifications based on Expected Utility Theory and theory...
Persistent link: https://www.econbiz.de/10015066381
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The myth of Methuselah and the uncertainty of death : the mortality fan charts
Dowd, Kevin; Blake, David; Cairns, Andrew - In: Risks : open access journal 4 (2016) 3, pp. 1-7
This paper uses mortality fan charts to illustrate prospective future male mortality. These fan charts show both the … most likely path of male mortality and the bands of uncertainty surrounding that path. The fan charts are based on a model … of male mortality that is known to provide a good fit to UK mortality data. The fan charts suggest that there are clear …
Persistent link: https://www.econbiz.de/10011507620
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Can pension funds partially manage longevity risk by investing in a longevity megafund?
Debonneuil, Edouard; Eyraud-Loisel, Anne; Planchet, … - In: Risks : open access journal 6 (2018) 3, pp. 1-27
Pension funds, which manage the financing of a large share of global retirement schemes, need to invest their assets in a diversified manner and over long durations while managing interest rate and longevity risks. In recent years, a new type of investment has emerged, that we call a longevity...
Persistent link: https://www.econbiz.de/10011867481
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Actuarial applications and estimation of extended CreditRisk+
Hirz, Jonas; Schmock, Uwe; Shevchenko, Pavel V. - In: Risks : open access journal 5 (2017) 2, pp. 1-29
We introduce an additive stochastic mortality model which allows joint modelling and forecasting of underlying death … causes. Parameter families for mortality trends can be chosen freely. As model settings become high dimensional, Markov chain …
Persistent link: https://www.econbiz.de/10011643397
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Enhancing Singapore's pension scheme : a blueprint for further flexibility
Kwong, Koon-shing; Tse, Yiu Kuen; Chan, Wai-Sum - In: Risks : open access journal 5 (2017) 2, pp. 1-17
Building a social security system to ensure Singapore residents have peace of mind in funding for retirement has been at the top of Singapore government’s policy agenda over the last decade. Implementation of the Lifelong Income For the Elderly (LIFE) scheme in 2009 clearly shows that the...
Persistent link: https://www.econbiz.de/10011643412
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Maximum market price of longevity risk under solvency regimes : the case of Solvency II
Levantesi, Susanna; Menzietti, Massimiliano - In: Risks : open access journal 5 (2017) 2, pp. 1-21
-forwards. The Cairns–Blake–Dowd model is used to represent the evolution of mortality over time that combined with the information …
Persistent link: https://www.econbiz.de/10011687316