We analyze the value of foresight in the drybulk freight market when repositioning a vessel through space and time. In order to do that, we apply an optimization model on a network with dynamic regional freight rate differences and stochastic travel times. We evaluate the value of the...

The approximate agents' wealth and price invariant densities of the prediction market model presented in Kets et al.(2014) is derived using the Fokker-Planck equation of the associated continuous-time jump process. We show that the approximation obtained from the evolution of log-wealth...

We investigate market selection and bet pricing in a simple Arrow security economy which we show is equivalent to the repeated prediction market models studied in the literature. We derive the condition for long run survival of more than one agent (the crowd) and quantify the information content...

Risk parity methods focused on volatility have gained traction in the last decade. A few extensions have been proposed, including tail risk parity. The authors show that, at its limits, tail risk parity converges towards the risk parity portfolio or the tangency portfolio. The authors also...

We propose a continuous-time portfolio selection model that explains the active-passive continuum. Our model illuminates the pivotal role of expert opinions and factors in the asset allocation process. In the model, investors aim to outperform a benchmark. As securities and benchmark's drift...

We study a two-stage purchase contract with a demand forecast update. The purchase contract provides the buyer an opportunity to adjust an initial commitment based on an updated demand forecast obtained at a later stage. An adjustment, if any, incurs a fixed as well as a variable cost. Using a...

You're probably familiar, at least in passing, with the 'convexity' of long-term bonds - i.e. that yields dropping 1% produce a bigger price move than yields rising 1%. A significant amount of brainpower has gone into understanding all the ramifications of this convexity in the fixed income...

This paper suggests a novel approach for predicting aggregate stock returns at quarterly and annual frequencies. Weak return predictability is consistent with the view that a stationary component of stock prices is highly persistent. In such cases, expected returns are time-varying but also...

We implement a long-horizon static and dynamic portfolio allocation involving a risk-free and a risky asset. This model is calibrated at a quarterly frequency for ten European countries. We also use maximum-likelihood estimates and Bayesian estimates to account for parameter uncertainty. We find...

We introduce a new class of forward performance processes that are endogenous and predictable with regards to an underlying market information set and, furthermore, are updated at discrete times. We analyze in detail a binomial model whose parameters are random and updated dynamically as the...