Tuesday, February 19, 2013

MoneyScience News

MoneyScience News

Blog Post: TheFinancialServicesClub: If you didn't think a payments revolution was taking place, think again

Posted: 19 Feb 2013 01:10 AM PST

If you didn't think there was a payments revolution taking place, then think again as dealmaking websites like Groupon, Living Social and Huddlebuy have been pushing payments systems.  read more...

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Blog Post: TheAlephBlog: Book Review: Time Out For Happiness

Posted: 18 Feb 2013 11:02 PM PST

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Published / Preprint: Cross-diffusion Modeling in Macroeconomics. (arXiv:1302.3958v1 [math.DS])

Posted: 18 Feb 2013 05:36 PM PST

This paper deals with the stability properties of a closed market, where capital and labour force are acting like a predator-prey system in population-dynamics. The spatial movement of the capital and labour force are taken into account by cross-diffusion effect. First, we are showing two possible ways for modeling this system in only one country's market (applying a simple functional response...

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Published / Preprint: An examination of the effect on the Icelandic Banking System of Ver{\dh}trygg{\dh} L\'{a}n (Indexed-Linked Loans). (arXiv:1302.4112v1 [q-fin.GN])

Posted: 18 Feb 2013 05:36 PM PST

In 1979 following a decade of hyperinflation, Iceland introduced Ver{\eth}trygg{\eth} l\'an, negatively amortised, index-linked loans whose outstanding principal is increased by the rate of the consumer price inflation index(CPI). The loans were part of a general government policy which used indexation to the CPI to address the economic consequences of the hyperinflation. Although...

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Published / Preprint: A Class of Solvable Optimal Stopping Problems of Spectrally Negative Jump Diffusions. (arXiv:1302.4181v1 [q-fin.PR])

Posted: 18 Feb 2013 05:36 PM PST

We consider the optimal stopping of a class of spectrally negative jump diffusions. We state a set of conditions under which the value is shown to have a representation in terms of an ordinary nonlinear programming problem. We establish a connection between the considered problem and a stopping problem of an associated continuous diffusion process and demonstrate how this connection may be...

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Published / Preprint: Viability and martingale measures under partial information. (arXiv:1302.4254v1 [q-fin.PM])

Posted: 18 Feb 2013 05:36 PM PST

We consider a financial market model with a single risky asset whose price process evolves according to a general jump-diffusion with locally bounded coefficients and where market participants have only access to a partial information flow $(\E_t)_{t\geq0}\subseteq(\F_t)_{t\geq0}$. For any utility function, we prove that the partial information financial market is...

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Blog Post: Falkenblog: Gold/SPY Ratio a Puzzler

Posted: 18 Feb 2013 05:35 PM PST

If Gold and the stock market are both geometric brownian motion, what are the odds of this pattern? It looks like there's a clear trend from when the US closed the gold window in 1971 to 1981 when the monetarist experiment ended, to the end of the internet bubble, then to today. Gold peaked in 1980, and basically is at a peak again, but it's interesting that this ratio seems stationary. I bet no...

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Published / Preprint: DUAL REPRESENTATIONS FOR GENERAL MULTIPLE STOPPING PROBLEMS

Posted: 18 Feb 2013 07:38 AM PST

In this paper, we study the dual representation for generalized multiple stopping problems, hence the pricing problem of general multiple exercise options. We derive a dual representation which allows for cash flows which are subject to volume constraints modeled by integer‐valued adapted processes and refraction periods modeled by stopping times. As such, this extends the works by Schoenmakers...

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Published / Preprint: CORRELATION UNDER STRESS IN NORMAL VARIANCE MIXTURE MODELS

Posted: 18 Feb 2013 07:38 AM PST

We investigate correlations of asset returns in stress scenarios where a common risk factor is truncated. Our analysis is performed in the class of normal variance mixture (NVM) models, which encompasses many distributions commonly used in financial modeling. For the special cases of jointly normally and t‐distributed asset returns we derive closed formulas for the correlation under stress. For...

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Published / Preprint: RISK MEASURES ON AND VALUE AT RISK WITH PROBABILITY/LOSS FUNCTION

Posted: 18 Feb 2013 07:38 AM PST

We propose a generalization of the classical notion of the V@Rλ that takes into account not only the probability of the losses, but the balance between such probability and the amount of the loss. This is obtained by defining a new class of law invariant risk measures based on an appropriate family of acceptance sets. The V@Rλ and other known law invariant risk measures turn out to be special...

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Published / Preprint: OPTIMAL INSURANCE DESIGN UNDER RANKâDEPENDENT EXPECTED UTILITY

Posted: 18 Feb 2013 07:38 AM PST

We consider an optimal insurance design problem for an individual whose preferences are dictated by the rank‐dependent expected utility (RDEU) theory with a concave utility function and an inverse‐S shaped probability distortion function. This type of RDEU is known to describe human behavior better than the classical expected utility. By applying the technique of quantile formulation, we...

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