Implied risk aversion: an alternative rating system for retail structured products

Fink, Holger; Geissel, Sebastian; Sass, Jörn; Seifried, Frank Thomas

doi:10.1007/s11147-018-9151-0

Cited by 7 publications

(2 citation statements)

References 46 publications

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“…Since the OEU risk measure has not been applied in portfolio optimization before, there exists no referential work. As the two portfolio optimization strategies should be comparable, we derive the OEU constraint from the V@R constraint value in a similar way as in Fink et al (2019).…”

Section: Portfolio Optimization With Oeu Constraintmentioning

confidence: 99%

Portfolio optimization with optimal expected utility risk measures

et al. 2021

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The purpose of this article is to evaluate optimal expected utility risk measures (OEU) in a risk-constrained portfolio optimization context where the expected portfolio return is maximized. We compare the portfolio optimization with OEU constraint to a portfolio selection model using value at risk as constraint. The former is a coherent risk measure for utility functions with constant relative risk aversion and allows individual specifications to the investor’s risk attitude and time preference. In a case study with three indices, we investigate how these theoretical differences influence the performance of the portfolio selection strategies. A copula approach with univariate ARMA-GARCH models is used in a rolling forecast to simulate monthly future returns and calculate the derived measures for the optimization. The results of this study illustrate that both optimization strategies perform considerably better than an equally weighted portfolio and a buy and hold portfolio. Moreover, our results illustrate that portfolio optimization with OEU constraint experiences individualized effects, e.g., less risk-averse investors lose more portfolio value in the financial crises but outperform their more risk-averse counterparts in bull markets.

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Section: Portfolio Optimization With Oeu Constraintmentioning

confidence: 99%

Portfolio optimization with optimal expected utility risk measures

et al. 2021

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“…In particular, NTS processes were constructed in Barndorff-Nielsen and Levendorskii (2001) by certain time-changed Brownian motions and have since then been investigated especially in the context of portfolio analysis and option pricing, cf. Barndorff-Nielsen and Shephard (2001); Kim et al (2012) or Fink et al (2019). In recent work, Ballotta et al (2015) formulate a general multivariate Lévy framework for combined equity and FX markets to investigate model-implied correlations based on futures and plain vanilla options.…”

Section: Introductionmentioning

confidence: 99%

Quanto Pricing beyond Black–Scholes

Fink

Mittnik

2021

JRFM

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Since their introduction, quanto options have steadily gained popularity. Matching Black–Scholes-type pricing models and, more recently, a fat-tailed, normal tempered stable variant have been established. The objective here is to empirically assess the adequacy of quanto-option pricing models. The validation of quanto-pricing models has been a challenge so far, due to the lack of comprehensive data records of exchange-traded quanto transactions. To overcome this, we make use of exchange-traded structured products. After deriving prices for composite options in the existing modeling framework, we propose a new calibration procedure, carry out extensive analyses of parameter stability and assess the goodness of fit for plain vanilla and exotic double-barrier options.

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Diversification with options and structured products

Yuan

Rieger

2020

Rev Deriv Res

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Implied risk aversion: an alternative rating system for retail structured products

Cited by 7 publications

References 46 publications

Portfolio optimization with optimal expected utility risk measures

Portfolio optimization with optimal expected utility risk measures

Quanto Pricing beyond Black–Scholes

Diversification with options and structured products

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