In this paper we formulate a continuous-time behavioral (a la cumulative prospect theory) portfolio selection model where the losses are constrained by a pre-specified upper bound. Economically the model is motivated by the previously proved fact that the losses occurring in a bad state of the...

By modeling asset returns via Brownian processes, we construct dynamic portfolios whose weights, relative to the market portfolio, are inflated (respectively, deflated) depending on high (respectively, low) levels of ex-ante beta for the corresponding assets. We establish under mild conditions...

Within a financial market where a risk-free bond and a long-lived risky asset are exchanged by investors with heterogeneous trading rules, we assume that the investors most exposed to the risky asset are subject to joint liquidation needs. The latter encompass a risk whenever the market impact...

We estimate risk aversion from investors' financial decisions in a person-to-person lending platform. We develop a method that obtains a risk aversion parameter from each portfolio choice. Since the same individuals invest repeatedly, we construct a panel dataset that we use to disentangle...

The recent global financial crisis has shown portfolio correlations between agents as one of the key channels of risk contagion and amplification. In this work, we analyse the structure and dynamics of the cross-correlation matrix of banks' loan portfolios in the yearly bank-firm credit network...

The objective of this paper is to combine a real options framework with portfolio optimization techniques and to apply this new framework to investments in the electricity sector. In particular, a real options model is used to assess the adoption decision of particular technologies under...

For pension-savers, a low payoff is a financial disaster. Such investors will most likely prefer left-skewed payoff distributions over right-skewed payoff distributions. We explore how such distributions can be delivered. Cautious-relaxed utility measures are cautious in ensuring that payoffs...

This paper describes a method for solving a class of forward-looking Markov-switching Rational Expectations models under noisy measurement, by specifying the unobservable expectations component as a general-measurable function of the observable states of the system, to be determined optimally...

This paper describes a method for solving a class of forward-looking Markov-switching Rational Expectations models under noisy measurement, by specifying the unobservable expectations component as a general-measurable function of the observable states of the system, to be determined optimally...