Risk Measures and Asset Pricing Models with New Versions of Wang Transform

Li, Baokun; Wang, Tonghui; Tian, Weizhong

doi:10.1007/978-3-642-35443-4_11

Cited by 8 publications

(5 citation statements)

References 7 publications

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“…The major idea behind this entropic measure is to associate uncertainty with a variational relationship between the original distribution and the transformed ones [43]. Since a transformed distribution can be derived from the initial one through a statistical transformation, further investigations in this entropic measure of uncertainty should be done in the future [44].…”

Section: Economic Justification Of the Increasing Interest In Sustainable Supply Chain Managementmentioning

confidence: 99%

Corporate Social Responsibility in Sustainable Supply Chain Management: An Econo-Bibliometric Perspective

Schınckus¹,

Akbari²,

Clarke³

2019

TEL

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This paper identifies and synthesizes information from academic journals, and examines the importance of corporate social responsibility (CSR) in supply chain management (SCM) literature. By using keywords such as "corporate social responsibility", "corporate citizenship" and "supply chain" in the major online publishers' database from 2006 to 2016, our study shows increasing importance of CSR topic in logistics and supply chain management. This growing trend has been observed at different levels (theoretical, geographical and industrial). Many moral and societal aspects can explain this interest, but this article focuses on a complementary justification by suggesting a conceptual framework formalizing the economic reason for which we can observe a growing interest in CSR issues in SCM.

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Section: Economic Justification Of the Increasing Interest In Sustainable Supply Chain Managementmentioning

confidence: 99%

Corporate Social Responsibility in Sustainable Supply Chain Management: An Econo-Bibliometric Perspective

Schınckus¹,

Akbari²,

Clarke³

2019

TEL

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show abstract

“…Yang and Yang [14] obtained the implied values and the optimal investment thresholds of the option to invest under CARA utility and the solution is proved to be independent of the utility time discount rate. Li et al [18] involved portfolio optimization in the capital asset pricing, and proposed a new version of Wang transform in two different forms of skew-normal distribution functions, used in the pricing strategy as the distortion function.…”

Section: Introductionmentioning

confidence: 99%

“…Because the pricing model is hard to derive, many scholars utilize numerical methods, major optimization methods based on utility function etc., to compute the electric power option premium [5,6,[11][12][13][14][15][16][17][18][19][20][21][22]. For example, Ewald and Yang [5] studied the classical real option problem in which an agent faces the decision if and when to invest optimally into a project, and an analytic expressions for the value and the optimal exercise time of the option to invest is derived by using techniques from optimal control theory.…”

Section: Introductionmentioning

confidence: 99%

Pricing electric power options by maximizing the utility of investment wealth with fuzzy measures

Chen

et al. 2014

Int. J. Mach. Learn. & Cyber.

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Electric power options are hardly priced for the non-storable nature of electric energy. A pricing model for European call options on electric power is proposed, which is expected to give option premiums to investors by using optimization, expected utility as well as fuzzy measure theories. Firstly, a formula of the option premium based on maximizing the utility of investment wealth is given, where the utility function represents the investor's preference for wealth and the Choquet expected integral with the kadditive fuzzy measure is used to express the difference between investors in the estimation of option value. Then, combined with practical constraints a pricing model for the electric power option is obtained by maximizing the utility of investment wealth with the fuzzy measures. The integration of fuzzy measure and probability measure depicts the uncertainty of the option value, making the produced option premium worthwhile to refer to. Lastly, the impacts of utility functions, fuzzy parameters and practical constraints are tested by examples.

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“…Probability transforms are distortion operators that combine both actuarial and financial pricing theory. One such distortion operator, widely used in ILS pricing, is the Wang Transform (see, e.g., Hamada and Sherris (2003), Kijima and Murimachi (2008), Li et al (2013)). However, Pelsser (2008) shows that the Wang transform cannot lead to consistent and arbitrage-free prices for a general stochastic process.…”

Section: Introductionmentioning

confidence: 99%

A Unified Bayesian Framework for Pricing Catastrophe Bond Derivatives

Domfeh¹,

Chatterjee²,

Dixon³

2022

Preprint

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Catastrophe (CAT) bond markets are incomplete and hence carry uncertainty in instrument pricing. As such various pricing approaches have been proposed, but none treat the uncertainty in catastrophe occurrences and interest rates in a sufficiently flexible and statistically reliable way within a unifying asset pricing framework. Consequently, little is known empirically about the expected risk-premia of CAT bonds. The primary contribution of this paper is to present a unified Bayesian CAT bond pricing framework based on uncertainty quantification of catastrophes and interest rates. Our framework allows for complex beliefs about catastrophe risks to capture the distinct and common patterns in catastrophe occurrences, and when combined with stochastic interest rates, yields a unified asset pricing approach with informative expected risk premia. Specifically, using a modified collective risk model -Dirichlet Prior-Hierarchical Bayesian Collective Risk Model (DP-HBCRM) framework -we model catastrophe risk via a model-based clustering approach. Interest rate risk is modeled as a CIR process under the Bayesian approach. As a consequence of casting CAT pricing models into our framework, we evaluate the price and expected risk premia of various CAT bond contracts corresponding to clustering of catastrophe risk profiles. Numerical experiments show how these clusters reveal how CAT bond prices and expected risk premia relate to claim frequency and loss severity.

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Risk Measures and Asset Pricing Models with New Versions of Wang Transform

Cited by 8 publications

References 7 publications

Corporate Social Responsibility in Sustainable Supply Chain Management: An Econo-Bibliometric Perspective

Corporate Social Responsibility in Sustainable Supply Chain Management: An Econo-Bibliometric Perspective

Pricing electric power options by maximizing the utility of investment wealth with fuzzy measures

A Unified Bayesian Framework for Pricing Catastrophe Bond Derivatives

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