Changing noise levels have a severe impact on house prices and through the leverage in financing on households wealth. This risk is essential for houses close to airports with uncertain aircraft regimes. We design and calibrate real options based on aircraft noise to hedge against noise risk....

We price derivatives defined for different asset classes with a full stochastic dependence structure. We consider jointly geometric Brownian motions and mean-reversion processes with a a stochastic variance-covariance matrix driven by a Wishart process. These models cannot be treated within the...

We study the partial and general equilibrium implications of value-at-risk (VaR) regulation in continuous-time economies with intermediate expenditure, stochastic opportunity set, and heterogeneous attitudes to risk. Our findings show that because of an anticipatory effect of VaR constraints on...

A typical problem arising in the financial planning for private investors consists in the fact that the initial investor's portfolio, the one determined by the consulting process of the financial institution and the universe of instruments made available to the investor have to be...

We analyze and compare analytically continuous-time financial equilibria where heterogeneous risk averse investors care about model misspecification through some preference for robustness and in the presence of a stochastic opportunity set. This incorporates a concern for model misspecification...

We present a geometric approach to discrete time multiperiod mean variance portfolio optimization that largely simplies the mathematical analysis and the economic interpretation of such model settings. We show that multiperiod mean variance optimal policies can be decomposed in an orthogonal set...

In a Lucas exchange economy with standard power utility, we study asset prices under learning and ambiguous information. In contrast with models featuring only learning or ambiguity, our model is successful in matching the equity premium, the interest rate, and the volatility of stock returns...

We consider the modelling of credit migration risk and the pricing of migration derivatives. To construct a Point-in-Time (PIT) rating migration matrix as the underlying value for derivative pricing we show first that the Affine Markov Chain models is not sufficient to generate PIT migration...

The strong autocorrelation between economic cycles demands that we analyze credit portfolio risk in a multiperiod setup. We embed a standard one-factor model in such a setup. We discuss the calibration of the model to Standard amp; Poor's ratings data in detail. But because single-period risk...

The Basel Committee on Banking Supervision (quot;the Committeequot;) released a consultative document that included a regulatory capital charge for operational risk. The complexity of the object quot;operational riskquot; led from the time of the document's release to vigorous and recurring...