Extensions of expected utility theory are sensitive to the tail behavior of the portfolio return distribution and may not be approximated reliably through higher-order moment expansions. We develop a novel approach for model risk assessment based on a projection method and apply it to portfolio...

We develop a novel class of time-changed Lévy models which are tractable and readily applicable, capture the leverage effect, and exhibit pure jump processes with finite or infinite activity. Our models feature four nested processes reflecting market, volatility and jump risks, and observation...

A multi-layer, multi-node ReLU network is a powerful, efficient, and popular tool in statistical prediction tasks. However, in contrast to the great emphasis on its empirical applications, its statistical properties are rarely investigated which is mainly due to its severe nonlinearity and heavy...

We empirically explore the role of investor disagreement and news for various types of stock jumps, where the dynamic of stock returns is captured by a contagion model. Our disagreement measure is derived from more than 173 million tweets from a social media investing platform, StockTwits, for...