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Author: Jia Luo Publisher: ISBN: 9780549317852 Category : Investments Languages : en Pages : 156
Book Description
This dissertation consists of two essays exploring optimal portfolio choice over the life cycle and optimal unemployment insurance program.
Author: Jia Luo Publisher: ISBN: 9780549317852 Category : Investments Languages : en Pages : 156
Book Description
This dissertation consists of two essays exploring optimal portfolio choice over the life cycle and optimal unemployment insurance program.
Author: Pablo Castaneda Publisher: ISBN: Category : Languages : en Pages : 182
Book Description
Abstract: Social security represents a fertile territory to be explored with the tools of modern finance, as social security systems in general affect the savings decisions of individuals in non trivial ways. This dissertation studies three issues of social security using the tools of continuous-time finance. All these issues are heavily motivated by the Chilean experience in the design of unemployment insurance and pension systems based on individual accounts. The first chapter deals with the incentives embedded in the compensation scheme of a risk averse portfolio manager. The interest in this case is placed on how the compensation scheme changes the investment decisions of the portfolio manager. Using a compensation scheme based on a benchmark portfolio to define the penalties and bonuses of the scheme, it is shown that the scheme motivates the portfolio manager to imitate the investment strategy of the benchmark portfolio whenever this helps the manager to either obtain a bonus or avoid a penalty. The second chapter focuses on the optimal design of benchmark portfolios. The analysis is carried out in the context of a classical Merton type portfolio choice problem. In particular, two related portfolio choice problems are studied, one dealing with the concerns of a representative worker (e.g., unemployment risk), and a second one dealing with the concerns of the portfolio manager in charge of a solidarity fund that finances the payment of a top-up monetary benefit to workers. The results suggest that the benchmark portfolio of the solidarity fund should take into account the optimal investment strategy of the representative worker's problem as the latter represents the funded portion of the liabilities of the former. The third and final chapter focuses on the long term assessment of the financial risk in a defined contribution pension system. In particular, it analyzes a case in which the competitive incentives dissociate the investment objectives of the portfolio manager from those of the pension fund member. The results suggest that the common association between risk and stock volatility may be misleading.
Author: Ti Zhou Publisher: ISBN: Category : Portfolio management Languages : en Pages : 282
Book Description
This dissertation is a contribution to the pricing and portfolio choice theory in incomplete markets. It consists of three self-contained but interlinked essays. In the first essay, we present a utility-based methodology for the valuation and the risk management of mortgage-backed securities subject to totally unpredictable prepayment risk. Incompleteness stems from its embedded pre-payment option which affects the security's cash flow pattern. The prepayment time is constructed via deterministic or stochastic hazard rate. The relevant indifference price consists of a linear term, corresponding to the remaining outstanding balance, and a nonlinear one that incorporates the investor's risk aversion and the interest payments generated by the mortgage contract. The indifference valuation approach is also extended to the case of homogeneous mortgage pools. In the second essay, using forward optimality criteria, we analyze a portfolio choice problem when the local risk tolerance is time-dependent and asymptotically linear in wealth. This class corresponds to a dynamic extension of the traditional (static) risk tolerances associated with the power, logarithmic and exponential utilities. We provide explicit solutions for the optimal investment strategies and wealth processes in an incomplete non-Markovian market with asset prices modelled as Ito processes. The methodology allows for measuring the investment performance in terms of a benchmark and alter-native market views. In the last essay, we extend the forward investment performance approach to study the optimal portfolio choice problem in an incomplete market driven by jump processes. The asset price is modelled by a one-dimensional Lévy-Itô process. We prove the existence of a forward performance process by restricting the local risk tolerance functions to be time-independent and linear in wealth. This yields only three types of performance measurement criteria, namely, exponential, power and logarithmic. The optimal portfolios are constructed via stochastic feedback controls under these criteria.
Author: Hui-Ju Tsai Publisher: ISBN: Category : Asset allocation Languages : en Pages : 116
Book Description
This dissertation contains two essays on the optimal portfolio decision for long-term investors. The first essay studies the optimal asset allocation for long-horizon investors with non-tradable labor income when multiple risky asset returns are predictable. It finds that more risk-averse investors hold a higher bond/stock ratio in their risky portfolios when labor income is positively correlated with stock return or independent of risky asset returns, but the reverse is true when labor income is positively correlated with bond return. The allocation to stock inherits the inverted U-shaped pattern of labor income growth with respect to expected time until retirement. These results suggest that popular recommendations of investment advisors that more conservative investors should hold a higher bond/stock ratio and that the portfolio allocation to stock should equal 100 minus age may both lack theoretical justification. In the out-of-sample performance test, the dynamic portfolio shows the highest mean returns and Sharpe ratio than two benchmark portfolios, justifying the economic significance of incorporating the time-variation of investment opportunities and nontradable labor income into investors' portfolio choice. The second essay studies employees' optimal portfolio in their defined contribution pension plans. Assuming a discrete time model with predictable risky asset returns, the essay finds that the employees' optimal portfolio decision can be greatly affected by the employees' time to retirement, risk preference, contribution rate as well as the correlation between labor income and asset returns. Performance test shows that the gains from adopting the dynamic portfolio strategy relative to several benchmark strategies, including the 1/n rule, the optimal static strategy with and without the consideration of asset return predictability, all stock strategy, and all company stock strategy, are economically significant and the economic gain increases with employees' risk aversion. The empirical evidence that employees invest significantly in their company stock in pension plans is difficult to be justified, even after the consideration of short-sale constraints, higher expected company stock return, employees' familiarity with their company, and employers' exclusive match policy. Over allocation to company stock can be very costly, especially to conservative employees.
Author: Jia Luo
Author: Jia Luo
Author: Pablo Castaneda
Author: Francisco João Ferreira Gomes
Author: Stephen Philip Allen
Author: Rainer Schüssler
Author: Ti Zhou
Author: Jialun Li
Author: 
Author: 
Author: Hui-Ju Tsai