This paper analyzes the optimality of financial portfolios when the investor has a utility with ambiguity aversion. It provides a general result about the optimal portfolio profile under ambiguity, in the Anscombe–Aumann framework, using the Maccheroni et al. (2006) approach which includes...

This paper undertakes the issue of portfolio insurance from the perspective of a risk-averse agent requiring his financial wealth to grow at a floored rate in excess of an equity benchmark. The suggested solution is a generalization of the CPPI approach within a two-equity asset framework. The...

The objective is to show that endogenous discounting models should use a felicity function constrained to a positive domain. A variety of articles use the Mangasarian or Arrow and Kurz condition as a sufficient condition for optimality, which restricts felicity to a negative domain. Since the...

We explore the role of habit formation in housing in explaining the life-cycle household allocations. Empirical studies about households in the U.S. reveal that the housing profile increases monotonically until age mid-60s and then flattens out. The model is realistically calibrated and solved...

A real options market model is developed, which derives the firms' optimal investment and disinvestment thresholds simultaneously in a competitive environment. It combines genetic algorithms and stochastic simulation, whereby vast modelling flexibility is gained. For example, different market...

This paper investigates the role of foreign exchange reserve investment to hedge overall macroeconomic risks. Different from usual micro profit-maximizing purpose, the investment with macro objective is unique in the field of foreign reserve investment. We propose a framework of...

As opposed to institutional investors, individual investors typically have several investment objectives in mind. The traditional utility maximization approach is not only oversimplified but also may not be suitable for real world application. Behavioral asset allocation divides a portfolio into...

In the light of the global financial crisis and sovereign debt crisis, this paper investigates the dependence patterns in 24 European equity markets from January 5, 2004 to July 1, 2016. We further examine whether these stressful events trigger contagion. Given that investors tend to behave...

This paper examines the short term persistence in performance of equity mutual funds around the world between 1990 and 2013. Using a large survivorship bias-free sample for 35 countries, we document strong evidence of persistence in daily mutual fund returns over quarterly measurement periods....