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Generalized entropy and model uncertainty

Meyer-Gohde, Alexander - 2017 - This version: August 4, 2017

I entertain a generalization of the standard Bolzmann-Gibbs-Shannon measure of entropy in multiplier preferences of model uncertainty. Using this measure, I derive a generalized exponential certainty equivalent, which nests the exponential certainty equivalent of the standard Hansen-Sargent...

Persistent link: https://www.econbiz.de/10011701075

Solution methods for models with rare disasters

Fernández-Villaverde, Jesús; Levintal, Oren - In: Quantitative economics : QE ; journal of the … 9 (2018) 2, pp. 903-944

(DSGE) models with rare disasters along the lines of those proposed by Rietz (1988), Barro (2006), Gabaix (2012), and Gourio … (2012). DSGE models with rare disasters require solution methods that can handle the large nonlinearities triggered by low …‐varying disaster risk with perturbation, Taylor projection, and Smolyak collocation. Our main finding is that Taylor projection …

Persistent link: https://www.econbiz.de/10011994514

Factor-Based Hedge Fund Replication with Risk Constraints

Harris, Richard D. F. - 2017

In this paper, we propose a method for hedge fund replication using a factor-based model supplemented with a series of risk and return constraints that implicitly target all the moments of the hedge fund return distribution. We use the approach to replicate the monthly returns of ten broad hedge...

Persistent link: https://www.econbiz.de/10012951213

Public Debt Sustainability Under Uncertainty : An Invariant Set Approach

Rozenov, Rossen - 2017

The paper offers an approach to assessing the sustainability of public debt taking into account the effect of fiscal policy on output, as well as uncertainty in the model parameters and system dynamics. Uncertainty is specified in general terms, and the analysis is based on the notion of...

Persistent link: https://www.econbiz.de/10012956494

Chebyshev Methods for Ultra-Efficient Risk Calculations

Zeron Medina Laris, Mariano - 2018

Financial institutions now face the important challenge of having to do multiple portfolio revaluations for their risk computation. The list is almost endless: from XVAs to FRTB, stress testing programs, etc. These computations require from several hundred up to a few million revaluations. The...

Persistent link: https://www.econbiz.de/10012921166

Robo-Advising Under Rare Disasters

Liang, Jiawen; Chen, Cathy Yi‐Hsuan; Chen, Bowei - 2022

Robo-advisors provide investors with automated portfolio management services, and their growth is unprecedented. They performed less well during the COVID-19 pandemic than they had done during the non-crisis period. That less satisfactory performance was due to the fact that rare disasters are...

Persistent link: https://www.econbiz.de/10013491747

Downside Risk in Multiperiod Tracking Error Models

Barro, Diana - 2012

The recent crisis made it evident that replicating the performance of a benchmark is not a sufficient goal to meet the expectations of usually risk-averse investors. The manager should also consider that the investor are seeking for a downside protection when the benchmark performs poorly and...

Persistent link: https://www.econbiz.de/10013103103

Two-Stage Portfolio Optimization with Higher-Order Conditional Measures of Risk

Gulten, Sitki - 2013

The importance of portfolio optimization in finance field has been increasing significantly. Although, portfolio optimization problems over a single period or multiple periods are studied extensively, the problem with an option to rebalance over multiple periods is not considered significantly....

Persistent link: https://www.econbiz.de/10013091376

Model01 : Quantifying the Risk of Incremental Model Changes

Abasto, Damian - 2014

Persistent link: https://www.econbiz.de/10013047896

Representations for optimal stopping under dynamic monetary utility functionals

Krätschmer, Volker; Schoenmakers, John - 2009

In this paper we consider the optimal stopping problem for general dynamic monetary utility functionals. Sufficient conditions for the Bellman principle and the existence of optimal stopping times are provided. Particular attention is payed to representations which allow for a numerical...

Persistent link: https://www.econbiz.de/10003905569