capital asset pricing, as one of the basic theories in finance and investment area, develop a model for estimation of expected rate of return and equity cost of capital. this model has many applications in the field of finance. one of anomalies in the capital asset pricing model is the value premium that its proponents believe this risk premium is compensation for a risk not mentioned in origin...

Risk management through marginal rebalancing is important for institutional investors due to the size of their portfolios. We consider the problem of improving marginally portfolio VaR and CVaR through a marginal change in the portfolio return characteristics. We study the relative significance of standard deviation, mean, tail thickness, and skewness in a parametric setting assuming a Student’...

6 Chance constraints and the choice of uncertainty sets 15 6.1 Value at risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 6.2 Safe convex approximations for chance constraints . . . . . . . . . . . . . . . 17 6.3 Tightest convex bounds and conditional value at risk . . . . . . . . . . . . . 18 6.4 Analytic approximation using moment generating functions . . . . . ....

We develop awareness-dependent subjective expected utility by taking unawareness structures introduced in Heifetz, Meier, and Schipper (2006, 2008, 2011a) as primitives in the Anscombe-Aumann approach to subjective expected utility. We observe that a decision maker is unaware of an event if and only if her choices reveal that the event is “null” and the negation of the event is “null”. Moreover...

In this paper we derive closed-form solutions for the cumulative density function and the average value-at-risk for five subclasses of the infinitely divisible distributions: classical tempered stable distribution, Kim-Rachev distribution, modified tempered stable distribution, normal tempered stable distribution, and rapidly decreasing tempered stable distribution. We present empirical evidenc...

We develop a framework for continuous search for information on a choice set of multiple alternatives, and apply it to consumer search in a product market. When a consumer considers purchasing a product in a product category, the consumer can gather information sequentially on several products. At each moment the consumer can choose which product to gather more information on, and whether to st...

In this paper we present a framework for backtesting all currently popular risk measurement methods (including value-at-risk and expected shortfall) using the functional delta method. Estimation risk can be taken explicitly into account. Based on a simulation study we provide evidence that tests for expected shortfall with acceptable low levels have a better performance than tests for value-at-...

We offer a new explanation for the long-run underperformance of IPO stocks using prospect theory. According to this theory, uncertain outcomes enter an investor’s utility function through a nonlinear transformation of their probabilities. Small probability events are given more weight than in expected utility theory, whereas median and large probability events are given less weight. IPO stocks ...

This paper discusses how numerically imprecise information can be modelled and how a risk evaluation process can be elaborated by integrating procedures for numerically imprecise probabilities and utilities. More recently, representations and methods for stating and analysing probabilities and values (utilities) with belief distributions over them (second order representations) have been sugges...