Mathematics and Financial Economics
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Risk-minimization for life insurance liabilities with basis risk
Mathematics and Financial Economics - Tập 10 - Trang 151-178 - 2015
In this paper we study the hedging of typical life insurance payment processes in a general setting by means of the well-known risk-minimization approach. We find the optimal risk-minimizing strategy in a financial market where we allow for investments in a hedging instrument based on a longevity index, representing the systematic mortality risk. Thereby we take into account and model the basis ri......
Accounting for risk aversion in derivatives purchase timing
Mathematics and Financial Economics - Tập 6 - Trang 363-386 - 2012
We study the problem of optimal timing to buy/sell derivatives by a risk-averse agent in incomplete markets. Adopting the exponential utility indifference valuation, we investigate this timing flexibility and the associated delayed purchase premium. This leads to a stochastic control and optimal stopping problem that combines the observed market price dynamics and the agent’s risk preferences. Our......
On the market price of risk
Mathematics and Financial Economics - Tập 15 - Trang 675-718 - 2021
An important parameter describing the state of capital markets, investment opportunity sets, and asset pricing is the unobservable market risk price. The estimated risk price depends upon the selected asset set, the number of assets, the investment horizon, and the sample period. We document the large theoretical and empirical probability of an unacceptably negative sample estimate for the unbiase......
Event risk, contingent claims and the temporal resolution of uncertainty
Mathematics and Financial Economics - Tập 8 - Trang 29-69 - 2013
We study the pricing and hedging of contingent claims that are subject to Event Risk which we define as rare and unpredictable events whose occurrence may be correlated to, but cannot be hedged perfectly with standard marketed instruments. The super-replication costs of such event sensitive contingent claims (ESCC), in general, provide little guidance for the pricing of these claims. Instead, we s......
Note on multidimensional Breeden–Litzenberger representation for state price densities
Mathematics and Financial Economics - Tập 8 Số 2 - Trang 153-157 - 2014
Optimal collective investment: an analysis of individual welfare
Mathematics and Financial Economics - Tập 17 - Trang 101-125 - 2022
We analyze optimal asset allocation in continuous time for a collective of tied-together investors. We rely on a specific collective utility function which dates back to Karatzas et al. (Math Oper Res 15(1):80–128, 1990), by which the fund manager maximizes the weighted average of expected individual utilities for the investors in the collective. This problem allows for a closed form solution. The......
The lifetime of a financial bubble
Mathematics and Financial Economics - - 2016
We combine both a mathematical analysis of financial bubbles and a statistical procedure for determining when a given stock is in a bubble, with an analysis of a large data set, in order to compute the empirical distribution of the lifetime of financial bubbles. We find that it follows a generalized gamma distribution, and we provide estimates for its parameters. We also perform goodness of fit te......
Liquidation with self-exciting price impact
Mathematics and Financial Economics - Tập 10 - Trang 15-28 - 2015
We study optimal execution with “self-exciting” price impact, where persistent trades not only incur price impact but also increase the execution costs for successive orders. This model is motivated by an equilibrium between fundamental sellers, market makers, and end users. For risk-neutral investors, it leads to faster initial trading compared to the constant execution rate of Bertsimas and Lo [......
Consumption and portfolio decisions with uncertain lifetimes
Mathematics and Financial Economics - Tập 14 Số 3 - Trang 507-545 - 2020
Dynamic Cournot-Nash equilibrium: the non-potential case
Mathematics and Financial Economics - Tập 17 - Trang 153-174 - 2022
We consider a large population dynamic game in discrete time where players are characterized by time-evolving types. It is a natural assumption that the players’ actions cannot anticipate future values of their types. Such games go under the name of dynamic Cournot-Nash equilibria, and were first studied by Acciaio et al. (SIAM J Control Optim 59:2273–2300, 2021), as a time/information dependent v......
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