We model the volatility of a single risky asset using a multifactor (matrix) Wishart affine process, recently introduced in finance by Gourieroux and Sufana. As in standard Duffie and Kan affine models the pricing problem can be solved through the Fast Fourier Transform of Carr and Madan. A...

This paper proposes a framework to evaluate the impact of longevity-linked securities on the risk-return trade-off for traditional portfolios. Generalized unexpected raise in life expectancy is a source of aggregate risk in the insurance sector balance sheets. Longevity-linked securities are a...

We view economic time series as the result of a cascade of shocks occurring at different times and different frequencies (scales). We suggest that economic relations that are found to be elusive when using raw data may hold true for different layers (details) in the cascade of economic shocks....

type="main" xml:lang="en" <p>We illustrate a numerical simulation method to decompose a portfolio of derivative securities in a linear combination of dynamical risk factors. The price of the portfolio and its sensitivities are linear functions of these factors. <p>The method generalizes the static...</p></p>

We propose an extension of the transform approach to option pricing introduced in Duffie, Pan and Singleton (Econometrica 68(6) (2000) 1343–1376) and in Carr and Madan (Journal of Computational Finance 2(4) (1999) 61–73). We term this extension the "coherent state transform" approach, it...

The presence of illiquid assets, such as human wealth or a family owned business, complicates the problem of portfolio choice. This paper is concerned with the problem of optimal asset allocation and consumption in a continuous time model when one asset cannot be traded. This illiquid asset,...