We consider situations where a pension plan has opted to hedge its longevity risk using an index-based longevity hedging instrument such as a q-forward or deferred longevity swap. The use of index-based hedges gives rise to basis risk, but benefits, potentially, from lower costs to the hedger and greater liquidity. We focus on quantification of optimal hedge ratios and hedge effectiveness and i...

Wagner, Robert, M.S., Department of Agribusiness and Applied Economics, College of Agriculture, North Dakota State University, April 2001. Risk Management Strategies for Grain Traders and Processors. Major Professor: Dr. William W. Wilson. This study reviewed the theory and current techniques of risk management for firms operating in the agribusiness industry. Various motivations and tools of h...

Static hedge portfolios for barrier options are extremely sensitive with respect to changes in the parameters of the underlying financial market model. In this paper we develop a new semi-infinite programming formulation of the static super-replication problem in stochastic volatility models which allows to incorporate the model parameter uncertainty in the sense of a worst case design. After p...

We show that the Hedge algorithm, a method that is widely used in Machine Learning, can be interpreted as a particular instance of Dual Averaging schemes, which have recently been introduced by Nesterov for regret minimization. Based on this interpretation, we establish three alternative methods of the Hedge algorithm: one in the form of the original method, but with optimal parameters, one tha...

Recent research reveals that hedge fund returns exhibit a range of different, possibly non-linear pay-off patterns. It is difficult to qualify all these patterns simultaneously as being rational in a traditional framework for optimal financial decision making. In this paper we present a simple model based on loss aversion that can accommodate for all of these pay-off structures in one unifying ...

This paper examines the ability of several models to generate optimal hedge ratios. Statistical models employed include univariate and multivariate GARCH models, and exponentially weighted and simple moving averages. The variances of the hedged portfolios derived using these hedge ratios are compared with those based on market expectations implied by the prices of traded options. One-month and ...

Over the last couple of decades there have been unprecedented, and to some extent unexpected, increases in life expectancy which have raised important questions for retirement savings. We study optimal consumption and saving choices in a life-cycle model, in which we allow for changes in the distribution of survival probabilities, according to the Lee-Carter (1992) model. We allow individuals t...

It is widely accepted that, when return distributions are non-normal, the use of the Sharpe ratio can lead to misleading conclusions. It is well documented that deviations of hedge fund return distributions from normality are statistically significant. The literature on performance evaluation that takes into account the non-normality of return distributions is a vast one. However, there is anot...

The search for methodologies that accurately measure performance and performance persistence continues to evolve. This is especially true for investment strategies such as hedge funds, which have been shown, in several instances, to not be normally distributed. In this article, we evaluate performance of hedge funds using conditional approaches and GMM. Unlike the Sharpe ratio or Jensen’s alpha...