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We analyze the impact of risk and ambiguity aversion using a lifecycle recursive utility model. Both risk and ambiguity aversion are shown to reduce annuity demand and enhance bond holdings. We obtain this result using an intertemporal framework in which we can vary both risk and ambiguity...
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In this paper we address the problem of robust portfolio allocation under uncertainty with respect to the dependence between risky asset returns and for an ambiguity averse investor. We use the multiplier preferences framework with a penalty for ambiguity aversion that is proportional to the...
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Each financial crisis calls for - by its novelty and the mechanisms it shares with preceding crises - appropriate means to analyze financial risks. In Extreme Financial Risks and Asset Allocation, the authors present in an accessible and timely manner the concepts, methods, and techniques that...
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This article examines certain types of saving institutions or insurance companies that are subject to surrender and default risks, in a stochastic interest rate context. In the setting under study, investors are endowed with an option to surrender. The goal of the article is to study how this...
Persistent link: https://www.econbiz.de/10013068843
In this paper, we indicate that risk vulnerability can be associated with the concept of downside risk aversion (DRA) and an assumption about its behavior, namely that it is decreasing in wealth. Specifically, decreasing downside risk aversion in the Arrow-Pratt and Ross senses are respectively...
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