pricing for an insurance policy can be described as the process of calculation of expectedcompensation to be paid to property losers as well as associated costs of potential risks. loss forecast isaccurate if the risks will be identified appropriately in order to calculate the frequency and expected severityof losses.this is particularly important about environmental risks since most of them ap...

This paper investigates whether risks associated with time-varying arrival of jumps and their effect on the dynamics of higher moments of returns are priced in the conditional mean of daily market excess returns. We find that jumps and jump dynamics are significantly related to the market equity premium. The results from our time-series approach reinforce the importance of the skewness premium ...

This paper uses the stochastic discount factor (SDF) to price real options and introduces the expected discounted shortfall (EDS) risk measure to control risk. A multivariate covariance based SDF modelling framework is described. Explicit formulae linking the correlation matrix to the risk premium are derived for assets prices following both Brownian and Ornstein-Uhlenbeck processes. Applying t...

We solve, theoretically and numerically, the problems of optimal portfolio choice and indifference valuation in a general continuous-time setting. The setting features (i) ambiguity and ambiguity averse preferences, (ii) discontinuities in the asset price processes, with a general and possibly infinite activity jump part next to a continuous diffusion part, and (iii) general and possibly non-co...

We develop an algorithm to compute asset allocations for Kahneman and Tversky’s (1979) prospect theory. An application to benchmark data as in Fama and French (1992) shows that the equity premium puzzle is resolved for parameter values similar to those found in the laboratory experiments of Kahneman and Tversky (1979). While previous studies like Benartzi and Thaler (1995), Barberis, Huang, and...

We solve, theoretically and numerically, the problems of optimal portfolio choice and indifference valuation in a general continuous-time setting. The setting features (i) ambiguity and ambiguity averse preferences, (ii) discontinuities in the asset price processes, with a general and possibly infinite activity jump part next to a continuous diffusion part, and (iii) general and possibly non-co...

Abstract Dividend payments are firm events on a recurring and predictable basis. High returns in the period between announcement-date ex-dividend date main driver for so-called dividend month premium, which positive abnormal months corporations predicted to issue payments. In our empirical analysis of German stock market, we find robust is particularly high stocks with surprise. Knowing dates a...

The liberalization of energy markets brought full competition to the electric power industry. In wholesale sector, producers and retailers submit bids day-ahead markets, where prices are uncertain, or alternatively, they sign bilateral contracts hedge against pool price volatility. retail compete with end-use customers. Typically, such subject a high-risk premium—that is, request high premium c...

the purpose of this paper is to explain the causes of long-run movements in the parallel market premium in the pre-and-post revolution iranian economy. the paper suggests that the premium is affected by both real and monetary shocks. non-spurious co-integration results indicate that negative oil revenue shocks and a revolution-induced exogenous capital outflow caused the parallel market paralle...

This paper develops a nonparametric approach to examine how portfolio and consumption choice depends on variables that forecast time-varying investment opportunities. I estimate single-period and multiperiod portfolio and consumption rules of an investor with constant relative risk aversion and a one-month to 20year horizon. The investor allocates wealth to the NYSE index and a 30-day Treasury ...