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A note on the fundamental theorem of asset pricing under model uncertainty

Bayraktar, Erhan; Zhang, Yuchong; Zhou, Zhou - In: Risks : open access journal 2 (2014) 4, pp. 425-433

We show that the recent results on the Fundamental Theorem of Asset Pricing and the super-hedging theorem in the context of model uncertainty can be extended to the case in which the options available for static hedging (hedging options) are quoted with bid-ask spreads. In this set-up, we need...

Persistent link: https://www.econbiz.de/10010489073

Reverse sensitivity analysis for risk modelling

Pesenti, Silvana M. - In: Risks : open access journal 10 (2022) 7, pp. 1-23

We consider the problem where a modeller conducts sensitivity analysis of a model consisting of random input factors, a corresponding random output of interest, and a baseline probability measure. The modeller seeks to understand how the model (the distribution of the input factors as well as...

Persistent link: https://www.econbiz.de/10013364877

Robust portfolio optimization with environmental, social, and corporate governance preference

Escobar, Marcos; Jiao, Yiyao - In: Risks : open access journal 12 (2024) 2, pp. 1-29

This study addresses the crucial but under-explored topic of ambiguity aversion, i.e., model misspecification, in the … ambiguity-averse investor allocating resources to a risk-free asset, a market index, a green stock, and a brown stock. The study … asset returns and ESG ratings, the substantial influence of ambiguity on optimal trading strategies, particularly …

Persistent link: https://www.econbiz.de/10014497337

Model error (or ambiguity) and its estimation, with particular application to loss reserving

Taylor, Greg; Mc Guire, Gráinne - In: Risks : open access journal 11 (2023) 11, pp. 1-28

This paper is concerned with the estimation of forecast error, particularly in relation to insurance loss reserving. Forecast error is generally regarded as consisting of three components, namely parameter, process and model errors. The first two of these components, and their estimation, are...

Persistent link: https://www.econbiz.de/10014435599

Model uncertainty and selection of risk models for left-truncated and right-censored loss data

Zhao, Qian; Upretee, Sahadeb; Yu, Daoping - In: Risks : open access journal 11 (2023) 11, pp. 1-17

Insurance loss data are usually in the form of left-truncation and right-censoring due to deductibles and policy limits, respectively. This paper investigates the model uncertainty and selection procedure when various parametric models are constructed to accommodate such left-truncated and...

Persistent link: https://www.econbiz.de/10014435618

An optimal investment strategy for insurers in incomplete markets

Badaoui, Mohamed; Fernández Cabaleiro, Begoña; … - In: Risks : open access journal 6 (2018) 2, pp. 1-23

exponential, an existence and uniqueness theorem is proven for the non-linear Hamilton-Jacobi-Bellman equation (HJB). The optimal …

Persistent link: https://www.econbiz.de/10011865623

Asymptotic expected utility of dividend payments in a classical collective risk process

Baran, Sebastian; Constantinescu, Corina; Palmowski, … - In: Risks : open access journal 11 (2023) 4, pp. 1-15

We find the asymptotics of the value function maximizing the expected utility of discounted dividend payments of an insurance company whose reserves are modeled as a classical Cramér risk process, with exponentially distributed claims, when the initial reserves tend to infinity. We focus on the...

Persistent link: https://www.econbiz.de/10014303657

Paradox-proof utility functions for heavy-tailed payoffs : two instructive two-envelope problems

Powers, Michael R. - In: Risks : open access journal 3 (2015) 1, pp. 26-34

We identify restrictions on a decision maker's utility function that are both necessary and sufficient to preserve dominance reasoning in each of two versions of the Two-Envelope Paradox (TEP). For the classical TEP, the utility function must satisfy a certain recurrence inequality. For the St....

Persistent link: https://www.econbiz.de/10010482072

Surplus sharing with coherent utility functions

Coculescu, Delia; Delbaen, Freddy - In: Risks : open access journal 7 (2019) 1/7, pp. 1-12

We use the theory of coherent measures to look at the problem of surplus sharing in an insurance business. The surplus share of an insured is calculated by the surplus premium in the contract. The theory of coherent risk measures and the resulting capital allocation gives a way to divide the...

Persistent link: https://www.econbiz.de/10012018695

A general framework for portfolio theory : part I: theory and various models

Maier-Paape, Stanislaus; Zhu, Qiji Jim - In: Risks : open access journal 6 (2018) 2, pp. 1-35

Utility and risk are two often competing measurements on the investment success. We show that efficient trade-off between these two measurements for investment portfolios happens, in general, on a convex curve in the two-dimensional space of utility and risk. This is a rather general pattern....

Persistent link: https://www.econbiz.de/10011867378

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