We derive optimal portfolio weights for an investor who has a strong belief on the distribution of the stock price at a future time. That distribution may be in disagreement with standard equilibrium pricing models, and the investor wants to take advantage of the perceived mispricing and attractive risk premium. We compute numerically optimal weights for models in which the investor believes th...

This paper suggests a solution to what has become known as the "private equity premium puzzle" (Moskowitz and Vissing-Jorgensen (2002)). We interpret occupational choice as a dynamic portfolio choice problem of a life-cycle investor facing a liquidity constraint and imperfect information about the profitability of potential businesses. In this setting, becoming an entrepreneur is equivalent to ...

We consider the risk premium π demanded by a decision maker with present wealth x in order to be indifferent between obtaining a new level of wealth y1 with certainty, or to participate in a lottery which either results in unchanged wealth x or a level of wealth y2 > y1. We then define the relative risk premium λ as the quotient between π and the increase in wealth y1−x which the decision maker...

Hansjörg Albrecher, Reinhold Kainhofer, Robert F. Tichy In the framework of classical risk theory we consider the process Rt = u+ c t− ∑N(t) i=1 Xi, where c is a constant premium density, N(t) denotes a homogeneous Poisson process with intensity λ which counts the claims up to time t, and the claim amounts Xi are iid random variables with distribution function F (y). In this context Rt represen...

Special-rate life annuities are annuity products whose single premium is based on a mortality assumption driven (at least to some extent) by the health status of applicant. The ascertained via an appropriate underwriting step (which explains alternative expression “underwritten annuities”). Better rates then applied in presence poor conditions. worse conditions, smaller modal age at death (as w...

We investigate entropy as a financial risk measure. Entropy explains the equity premium of securities and portfolios in a simpler way and, at the same time, with higher explanatory power than the beta parameter of the capital asset pricing model. For asset pricing we define the continuous entropy as an alternative measure of risk. Our results show that entropy decreases in the function of the n...

By examining the impact of the introduction of the Euro on stock markets and on country diversification within the Eurozone, the evidence does not suggest a high risk to the stock market to justify a risk premium as a result of currency union. Although the Euro market integration has increased inter-country correlations, it does not preclude gains from international diversification, which parti...

This article provides an overview of compliance carbon markets that trade emission allowances and analyzes the properties as investable asset class. The authors discuss how local supply demand factors determine allowance prices, focusing on abatement costs policy adjustments. They then construct a novel total-return time series for four liquid develop equally-weighted Carbon Composite. found in...

The purpose of this study was to investigate the role of non-financial information analysis and risk-return analysis along with financial information in increasing the selected banks and financial institutions of Tehran Stock Exchange portfolio efficiency. To evaluate the efficiency of the portfolio, the Treynor's ratio was used and attempted to determine the Treynor's ratio of the selected opt...

This paper develops a bi-objective portfolio selection problem that maximizes returns and minimizes a risk measure called conditional Drawdown (CDD). The drawdown measures include the maximal Drawdown and Average Drawdown as its limiting case. The CDD family of risk functional is similar to conditional value at Risk (CVaR). In this paper, the fuzzy method has been used to solve the bi-objec...