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Application of stochastic optimal control to financial market debt crises

Stein, Jerome L. - 2009

This interdisciplinary paper explains how mathematical techniques of stochastic optimal control can be applied to the recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large literature in mathematical finance concerning optimal...

Persistent link: https://www.econbiz.de/10003807893

Tenure choice, portfolio structure and long-term care : optimal risk management in retirement

Fehr, Hans; Hofmann, Maurice - 2019

We study the interplay between tenure decisions, stock market investment and the public social security system. Housing equity not only serves a dual purpose as a consumption good and as an asset, but also provides insurance to buffer various risks in retirement. Our life cycle model captures...

Persistent link: https://www.econbiz.de/10012050806

Risk matters : breaking certainty equivalence

Parra-Alvarez, Juan Carlos; Polattimur, Hamza; Posch, Olaf - 2020

In this paper we use the property that certainty equivalence, as implied by a first-order approximation to the solution of stochastic discrete-time models, breaks in its equivalent continuous-time version. We study the extent to which a first-order approximated solution built by perturbation...

Persistent link: https://www.econbiz.de/10012211025

Rank dependent utility, tax evasion and labor supply

Eide, Erling; Simson, Kristine von; Strøm, Steinar - 2010

payers act according to some non-expected utility theory, and (2) Individual ethical norms and social stigma induce people … subjective probabilities of being penalised according to the rank dependent utility theory, and (2) Tax payers' beliefs about … utility theory. The model explains data 53% better than pure random choices and predicts hours worked in the regular economy …

Persistent link: https://www.econbiz.de/10008697806

Collective risk-taking decisions with heterogeneous beliefs

Gollier, Christian - 2003

Suppose that a group of agents having divergent expectations can share risks efficiently. We examine how this group should behave collectively to manage these risks. We show that the beliefs of the representative agent is in general a function of the group.s wealth level, or equivalently, that...

Persistent link: https://www.econbiz.de/10011507677

Climate policy, stranded assets, and investors' expectations

Sen, Suphi; Schickfus, Marie-Theres von - 2019

Climate policies to keep global warming below 2 degree celsius might render some of the world fs fossil fuels and related infrastructure worthless prior to the end of their economic life time. Therefore, some energy-sector assets are at risk of becoming stranded. This paper investigates whether...

Persistent link: https://www.econbiz.de/10012123063

Mean univariate-GARCH VaR portfolio optimization : actual portfolio approach

Ranković, Vladimir; Drenovak, Mikica; Urosevic, Branko; … - 2016

In accordance with Basel Capital Accords, the Capital Requirements (CR) for market risk exposure of banks is a nonlinear function of Value-at-Risk (VaR). Importantly, the CR is calculated based on a bank’s actual portfolio, i.e. the portfolio represented by its current holdings. To tackle...

Persistent link: https://www.econbiz.de/10011420698

Risk-taking-neutral background risk

Franke, Günter; Schlesinger, Harris; Stapleton, Richard C. - 2013

We define a class of risk-taking-neutral (RTN) background risks. These background risks have the property that they will not alter decisions made with respect to another risk, for individuals with HARA utility. If we wish to compare a decision made with and without some exogenous background...

Persistent link: https://www.econbiz.de/10009690709

Optimality and diversifiability of mean variance and arbitrage pricing portfolios

Pesaran, M. Hashem; Zaffaroni, Paolo - 2009

This paper investigates the limit properties of mean-variance (mv) and arbitrage pricing (ap) trading strategies using a general dynamic factor model, as the number of assets diverge to infinity. It extends the results obtained in the literature for the exact pricing case to two other cases of...

Persistent link: https://www.econbiz.de/10003910456

Investors' portfolio choice and tax reforms : the 2008 German corporate tax reform reconsidered

Stimmelmayr, Michael - 2015 - This version: March 2015

The paper provides a comprehensive assessment of the latest German corporate income and capital tax reform, which entails a major shift of the capital tax burden from the firm to the household level. Using a dynamic two-country computable general equilibrium model with integrated capital...

Persistent link: https://www.econbiz.de/10010509614