We analyze a new class of exotic equity derivatives called gap options or gap risk swaps. These products are designed by major banks to sell off the risk of rapid downside moves, called gaps, in the price of the underlying. We show that to price and manage gap options, jumps must necessarily be...

Constant proportion portfolio insurance (CPPI) allows an investor to limit downside risk while retaining some upside potential by maintaining an exposure to risky assets equal to a constant multiple of the quot;cushion,quot; the difference between the current portfolio value and the guaranteed...

We address the long-standing challenge of adding optimal exploration to the classic Hotelling model of a non-renewable resource. We completely solve such a model, using impulse control. The model, extending Arrow and Chang (1982), has two state variables: "proven" reserves and a finite...

We contribute to the debate on whether using ESG/SRI criteria in investment decisions improves portfolio performance. The choice of a specific ESG metric being crucial, we focus on the Net Environmental Contribution, a robust open-source measure of environmental transition alignment. From a...

We develop a structural model for pricing a defaultable bond issued by a companysubject to climate transition risk. We assume that the magnitude of thetransition risk impacts depends on a transition scenario, which isinitially unknown but is progressively revealed through theobservation of the...