Description: Investment Fallacies: Mathematical modeling of social phenomena

Description: Investment Fallacies: The Myth of Time Diversification

Description: This paper investigates the optimal multi-period proportional reinsurance strategy that minimizes the ruin probability of an insurer. Some conditions under which it is optimal to have no reinsurance are derived. Based on these results, a new concept, capital threshold of proportional reinsurance, is introduced. In the case of two periods, a lower bound of the capital threshold of proportional reinsurance is provided. Some economic implications and properties of this new concept are also discussed.

Description: This article examines how parameter uncertainty leads to uncertainty in Value at Risk VaR estimates. Lacking a closed form solution, we use a first order approximation of VaR to map parameter changes into changes in the VaR value. When the asymptotic distribution of parameter estimates is normal, this implies a normal approximation of the confidence interval about VaR. We describe this approximation in detail and explore some extensions to risk factor modeling.

Description: This paper demonstrates that using a conditional probability approach to analyzing investment data yields investment forecast and stock option pricing models which more closely match actual market data, and it demonstrates the impact that conditional probabilities could have on CAPM beta and risk premia calculations. Reprinted from: Journal of Financial and Economic Practice, Vol. 6 No. 2 Spring 2006.