We analyze hedge fund performance using the stochastic discount factor (SDF) approach and imposing the arbitrage-free requirement to correctly value the derivatives and dynamic trading strategies used by hedge funds. Using SDFs of many asset-pricing models, we evaluate hedge fund portfolios based on style and characteristics. Without the arbitrage-free requirement, pricing errors are relatively...

A renewal model in risk theory is considered, where H(u, y) is the tail of the distribution of the deficit at ruin with initial surplus u and F(y) is the tail of the ladder height distribution. Conditions are derived under which the ratio H(u, y)/F(u + y) is nondecreasing in u for any y ≥ 0. In particular, it is proven that if the ladder height distribution is stable and DFR or phase type, then...

We study several functions that have been proposed for comparing transport routes for a hazardous materials shipment. We show that many proposed path evaluation functions are based on an approximation. While these functions can be modified to avoid the approximation, these more accurate versions violate two reasonable axioms. We propose a new family of models by redefining the decision problem ...

The reaction of cattle farmers to CAP reforms under price risk depends on the farmers' technical flexibility and on the influence of direct subsidies on income stabilisation. The bovine sector subsidies, according to their rate of decoupling from product, can stabilise the income and modify the farmers' attitude towards market risk. A portfolio mutliperiod model represents a typical cattle farm...

The paper describes methodology of dealing with financial modelling under uncertainty with risk and vagueness aspects. An approach to modelling risks by the Value at Risk methodology under imprecise and soft conditions is solved. It is supposed that the input data and problem conditions is difficult to determine as real numbers or as some precise distribution function. Thus, vagueness is modell...

Consider a general bivariate Lévy-driven risk model. The surplus process Y , starting with Y0 = x > 0, evolves according to dYt = Yt−dRt − dPt for t > 0, where P and R are two independent Lévy processes representing, respectively, a loss process in a world without economic factors and a process describing return on investments in real terms. Motivated by a conjecture of Paulsen, we study the fi...

We investigate optimal consumption policies in the liquidity risk model introduced in [5]. Our main result is to derive smoothness C results for the value functions of the portfolio/consumption choice problem. As an important consequence, we can prove the existence of the optimal control (portfolio/consumption strategy) which we characterize both in feedback form in terms of the derivatives of ...

The financial statement audit is the process of collecting, evaluating, and aggregating relevant items of evidence pertaining to various management assertions related to the financial statement accounts to determine whether the company’s financial statements present fairly its financial position. The Dempster-Shafer theory [1] of belief functions has been argued to be an appropriate framework f...

Let X be an IR-valued continuous semimartingale, T a fixed time horizon and Θ the space of all IR-valued predictable X-integrable processes such that the stochastic integral G(θ) = ∫ θdX is a square-integrable semimartingale. A recent paper of Delbaen/Monat/Schachermayer/Schweizer/Stricker (1996) gives necessary and sufficient conditions on X for GT (Θ) to be closed in L(P ). In this paper, we ...

Confining ourselves to criterion (i) in the present paper we may then say that tile problem of calculating technical minimuna premiums is broadly spoken equivalent with the problem of estimating loss probabilities. Since art exact calculation of such probabilities is only possible for a few very simple and therefore mostly unrealistic risk models and since e.g Esscher's method is not always ver...