Model risk has a huge impact on any risk measurement procedure and its quantification is therefore a crucial step. In this paper, we introduce three quantitative measures of model risk when choosing a particular reference model within a given class: the absolute measure of model risk, the...

This paper proposes a general way to conceive public policy when there is noconsensual account of the situation of interest. The approach builds on an extension and dual formulation of the traditional theory of economic policy. It does not need a representative policymaker�s utility...

In this paper we propose a market consistent futures price dynamics model for cap-andtrade schemes, designed in the spirit of the European Union�s Emissions Trading Scheme(EU ETS). Historical price dynamics for the EU ETS suggest that, both, European emission Allowances (EUAs) and Certified...

In the United States and most industrialized countries, regulatory policies pertaining to food safety, occupational health, and environmental protection are (according to laws and statutes) science based. The complexity of some ecosystems and new technologies, however, makes it increasingly...

The aim of this paper is to determine the optimal structure of derivatives written on an illiquid asset, such as a catastrophic or a weather event. This transaction involves two agents: a bank which wants to hedge its initial exposure towards this illiquid asset and an investor which may buy the...

We study the perpetual American option characteristics in the case where the underlying dynamics involve a Brownian motion and a point process with a stochastic intensity. No assumption on the distribution of the jump size is made and we work with an arbitrary positive or negative jump. After...

In this paper we propose a market consistent futures price dynamics model for cap-andtrade schemes, designed in the spirit of the European Union’s Emissions Trading Scheme (EU ETS). Historical price dynamics for the EU ETS suggest that, both, European emission Allowances (EUAs) and Certified...