We derive the optimal portfolio choice for an investor who behaves according to Cumulative Prospect Theory. The study is done in a one-period economy with one risk-free asset and one risky asset, and the reference point corresponds to the terminal wealth arising when the entire initial wealth is...

There is considerable interest in finding numerical methods to price Asian options. Tse and Mok (2009) have proposed a new very simple closed-form expression for the price of a fixed-strike Asian option. Unfortunately their formula is not correct. This note shows that it is incorrect and...

We study the robustness of the results of Milevsky and Huang (2018) on the optimal demand for annuities to the choice of the utility function. To do so, we first propose a new way to span the set of all increasing concave utility functions by exploiting a one-to-one correspondence with the set...

Model-based decisions are highly sensitive to model risk that arises from the inadequacy of the adopted model. This paper reviews the existing literature on model risk assessment and shows how to use the theoretical results to develop a corresponding best practice. Specifically, we develop tools...

We construct an algorithm that makes it possible to numerically obtain an investor's optimal portfolio under general preferences. In particular, the objective function and risks constraints may be driven by benchmarks (reflecting state-dependent preferences). We apply the algorithm to various...

We study optimal investment strategies under the objective of maximizing the Omega ratio, proposed by Keating and Shadwick (2002) as an alternative to the Sharpe ratio for performance assessment of investment strategies. We show that in a standard set-up of the financial market the problem is...

The purpose of this article is to design and price a new type of participating life insurance contract. Participating contracts are popular in the US and in European countries; they satisfy various covenants and obey various regulations depending on the country where they are issued. The...

This paper develops a general valuation approach to price barrier options when the term structure of interest rates is stochastic. These products' barriers may be constant or stochastic, in particular we examine the case of discounted barriers (at the instantaneous interest rate). So, in...

We conduct a simultaneous test for several rational and behavioral factors which have been hypothesized to affect the uptake of life annuities on a sample of American individuals. In addition, we investigate whether analysts' stock market expectations affect the decision to annuitize retirement...

Robustness of risk measures to changes in underlying loss distributions (distributional uncertainty) is of crucial importance when making well-informed risk management decisions. In this paper, we quantify for any given distortion risk measure its robustness to distributional uncertainty by...