Showing 1 - 10 of 18,910
This paper provides a microfounded information acquisition technology based on a simple framework with information search. When searchable information is limited, an agent encounters increasingly more redundant information in his search for new information. Redundancy slows down the learning...
Persistent link: https://www.econbiz.de/10010529422
Replicating portfolios have recently emerged as an important tool in the life insurance industry, used for the valuation of companies' liabilities. This paper presents a replicating portfolio (RP) model for approximating life insurance liabilities as closely as possible. We minimize the L1 error...
Persistent link: https://www.econbiz.de/10011515725
In the existing financial literature, entropy based ideas have been proposed in portfolio optimization and in model calibration for options pricing. The abstracted problem corresponds to finding a probability measure that minimizes Kullbach-Leibler (KL) distance with respect to a known measure...
Persistent link: https://www.econbiz.de/10013140006
under ambiguity, called Shadow probability theory, a generalization of the Choquet expected utility. In this model … space. Risk and risk attitude, on the other hand, apply to the subordinated space, as in classical expected utility theory … the classical asset pricing theory by incorporating ambiguous probabilities. It proposes a well defined ambiguity premium …
Persistent link: https://www.econbiz.de/10013119880
We posit a fund manager and an individual investor who maximize the expected (log) utility of their respective terminal wealth. The manager possesses more information than the investor does and charges the latter, her would-be customer, a linear compensation fee. The investor will delegate his...
Persistent link: https://www.econbiz.de/10013102145
Exact analytical solutions to the problem of computing a minimum semivariance portfolio cannot be obtained due to the endogeneity of the semicovariance matrix. However, when the number of assets is small, the weights for such a portfolio can be determined numerically. This paper presents the R...
Persistent link: https://www.econbiz.de/10012839017
A variable annuity (VA) is an equity-linked annuity that provides investment guarantees to its policyholder and its contributions are normally invested in multiple underlying assets (e.g., mutual funds), which exposes VA liability to significant market risks. Hedging the market risks is...
Persistent link: https://www.econbiz.de/10012840053
Subdiffusive processes can be used in finance to explicitly accommodate the presence of random waiting times between trades or "duration", which in turn allows the modelling of price staleness effects. Option pricing models based on subdiffusions are incomplete, as they naturally account for the...
Persistent link: https://www.econbiz.de/10012893104
Handling risk factors in the context of a multi-asset risk parity portfolio allocation has created increased interest in recent literature. When allocating along risk factors through principal components, one major problem that persists is the potential existence of leverage or short positions...
Persistent link: https://www.econbiz.de/10013004601
In this paper we present an application where advanced undergraduate students can solve the expected utility portfolio model with a risk-free and a risky asset with both up and down returns in the Stock Market. With real Stock Market data, we use Excel Solver to find the portfolio decision and...
Persistent link: https://www.econbiz.de/10012860660