Showing 1 - 10 of 91
Pricing and hedging structured credit products poses major challenges to financial institutions. This paper puts several valuation approaches through a crucial test: How did these models perform in one of the worst periods of economic history, September 2008, when Lehman Brothers went under? Did...
Persistent link: https://www.econbiz.de/10011065598
Persistent link: https://www.econbiz.de/10010094492
Utility-maximizing consumption and investment strategies in closed form are unknown for realistic settings involving portfolio constraints, incomplete markets, and potentially a high number of state variables. Standard numerical methods are hard to implement in such cases. We propose a numerical...
Persistent link: https://www.econbiz.de/10012712406
The utility-maximizing consumption and investment strategy of an individual investor receiving an unspanned labor income stream seems impossible to find in closed form and very difficult to find using numerical solution techniques. We suggest an easy procedure for finding a specific, simple, and...
Persistent link: https://www.econbiz.de/10012719179
Utility-maximizing consumption and investment strategies in closed form are unknown for realistic settings involving portfolio constraints, incomplete markets, and potentially a high number of state variables. Standard numerical methods are hard to implement in such cases. We propose a numerical...
Persistent link: https://www.econbiz.de/10010990505
Persistent link: https://www.econbiz.de/10010073693
We consider the continuous-time portfolio optimization problem of an investor with constant relative risk aversion who maximizes expected utility of terminal wealth. The risky asset follows a jump-diffusion model with a diffusion state variable. We propose an approximation method that replaces...
Persistent link: https://www.econbiz.de/10010955117
type="main" <p>We develop a micro-based macromodel for residential home prices in an economy where defaults on residential mortgages negatively affect housing prices. Our model enables us to study the impact of subprime defaults on prime borrowers and the impact of various government policies on...</p>
Persistent link: https://www.econbiz.de/10011032013
This paper relates recursive utility in continuous time to its discrete-time origins and provides a rigorous and intuitive alternative to a heuristic approach presented in [Duffie, Epstein 1992], who formally define recursive utility in continuous time via backward stochastic differential...
Persistent link: https://www.econbiz.de/10012720007
This paper analyzes the portfolio decision of an investor facing the threat of illiquidity. In a continuous-time setting, the efficiency loss due to illiquidity is addressed and quantified. We show that the efficiency loss for a logarithmic investor with 30 years until the investment horizon is...
Persistent link: https://www.econbiz.de/10012729893