1,721,076 research outputs found
Asset Pricing, Diversification and Risk Ordering with Partially Exchangeable random Variables, Report n. 202, Dipartimento di Statistica e Matematica Applicata all'Economia, Università di Pisa
No full textA Comparison result for BFSDE's and Applications to Utility Theory
No full textIn general, a comparison Lemma for the solutions of Forward-Backward Stochastic Differential Equations (FBSDE) does not hold. Here we prove one for the backward component at the initial time, relying on certain monotonicity conditions on the coefficients of both components. Such a result is useful in applications. Indeed, one can use FBSDE's to define a utility functional able to capture the disappointment-anticipation effect for an agent in an intertemporal setting under risk. Exploiting our comparison result, we prove some "desirable" properties for the utility functional, such as continuity, concavity, monotonicity and risk aversion. Finally, for completeness, in a Markovian setting, we characterize the utility process by means of a degenerate parabolic partial differential equation
Asset pricing with endogenous aspirations
No full textWe develop the classical asset pricing analysis assuming that the representative agent is characterized by endogenous aspirations. The agent's aspirations at time t are given by a linear combination of the standard of living (habit) at time t (the "forward" part) and of the conditional expectation at t of the habit at the end of the agent's life (the "backward" part). With this process we capture the fact that the agent's preferences are affected by what he plans to do in the future. Under certain conditions, the risk premium turns out to be higher than that obtained with an additive expected utility when both the forward and the backward parts affect the utility negatively
Non-parametric computation of Greeks using high frequency data
No full textWe propose a way to compute the hedging Delta using the Malliavin weight method. Our approach, which we name the λ-method, generally outperforms the standard Monte Carlo finite difference method, especially for discontinuous payoffs. Furthermore, our approach is nonparametric, as we only assume a general local volatility model and we substitute the volatility and the other processes involved in the Greek formula with quantities that can be nonparametrically estimated from a given time series of observed prices
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