Giorgio Consigli | Università degli Studi di Bergamo (University of Bergamo) (original) (raw)

Uploads

Papers by Giorgio Consigli

Annals of operation research/Annals of operations research, Apr 17, 2024

Computational Management Science, Aug 13, 2018

WORLD SCIENTIFIC eBooks, Jul 25, 2012

IMA Journal of Management Mathematics, Jan 13, 2024

Handbook of asset and liability management, 2007

World Scientific Book Chapters, 2013

AbstractThe following sections are included:IntroductionRecent EvolutionEuro-corporate Bond Indic... more AbstractThe following sections are included:IntroductionRecent EvolutionEuro-corporate Bond IndicesBond indices and default probabilitiesMoody–s 2011 Global Credit ReportGlossaryReferences

WORLD SCIENTIFIC eBooks, Sep 14, 2016

This is a survey of the bond stock prediction model in international equity markets which is usef... more This is a survey of the bond stock prediction model in international equity markets which is useful for predicting the time varying equity risk premium (ERP) and for strategic asset allocation of bond-stock equity mixes. The model has two versions. Beginning with Ziemba and Schwartz (1991), the BSEYD model our is the difference between the most liquid long bond, usually thirty or ten or five years, and the trailing equity yield. The idea is that asset allocation between stocks and bonds is related to their relative yields and, when the bond yield is too high, there is a shift out of stocks into bonds that can cause an equity market correction. This model predicted the 1987 US, the 1990 Japan, the 2000, 2002 and 2007 US corrections. The FED model is a special case of the BSYED model with bond and stock yields assumed to be equal. A ratio model and the FED model have origins in reports and statements from the Federal Reserve System under Alan Greenspan, from 1996. Hence the ERP can be negative or positive and is thus partially predictable. Despite its predictive ability, the bond-stock model has been criticized as being theoretically unsound because it compares a nominal quantity, the long bond yield, with a real quantity, the earnings yield on stocks. However, inflation and mis-conception arguments may justify the model. Theoretical models of fair priced equity indices can be derived and compared to actual index values to ascertain danger levels. This paper surveys this literature with a focus on their economic and financial implications and its application to the study of stock market strategies and corrections in five worldwide equity markets.

Social Science Research Network, 2017

Quantitative Finance, 2022

The 15th International Conference on Stochastic Programming 2019 took place at the Norwegian Inst... more The 15th International Conference on Stochastic Programming 2019 took place at the Norwegian Institute of Science and Technology (NTNU) in Trondheim. Asgeir Tomasgard, whose impact on the development of stochastic optimization has been relevant and consistent over years, acted as the scientific chair. On that occasion, we presented a call for papers agreed with the co-editors of Quantitative Finance, Michael Dempster and Jim Gatheral, to whom we are sincerely grateful. Professor Dempster, in particular, has been a continuous source of support and motivation to complete this project. After two years of dedicated work, we are pleased to present six articles that we hope will not only set the stage in terms of the current state-of-the-art in financial stochastic optimization but also inspire future research efforts by colleagues in our area. We are grateful to all those who submitted their research articles to us for the issue. Looking at the six articles, which were eventually accepted, we have agreed as guest editors to give a detailed summary of their contents below. The title of the special issue, Discrete Stochastic Optimization in Finance, refers to the finance domain common to all contributions to this issue. The term discrete refers to modelling the dynamic nature of the contributions and their methodological perspective to this applied research field. At the very centre of all the articles in this issue is the concept of risk, mainly, but not only, financial risk, regarded from different rich and inspiring perspectives. In what follows we present the articles in this issue in enough detail to encourage interested readers to read the articles relevant to their research interests. The article by Schlotter and Pichler (2022) proposes the class of nested risk measures to quantify risk and studies their asymptotic behaviour in the context of two relevant application domains. These are related to asset pricing and optimal consumption investment problems, focusing in the former case on the original Merton’s optimal consumption problem. The authors characterize the existence of the risk-averse limit and demonstrate that the nested limit is unique, irrespective of the initially chosen risk measure. As a result, the two application domains are naturally framed in a risk-averse setting. In mainstream finance applications, risk aversion gives rise to a stream of risk premiums, comparable to dividend payments. In this context, the authors succeed in connecting coherent risk measures with the Sharpe ratio from modern portfolio theory and extract the Z-spread—a widely accepted quantity in economics to hedge risk. The results for European option pricing are then extended to risk-averse American options, where they study the impact of risk on the price as well as on the optimal time to exercise the option. The fundamental contribution of this article is the extension of asset pricing and optimal investment consumption to risk-averse investors with nested risk measures. Still focusing on the derivative pricing problem, Marzban et al. (2022) consider the problem of equal risk pricing and hedging in which the fair price of an option is determined so as to equate the long and short sides’ risk exposures. This is a novel pricing principle. The authors adopt the class of convex risk measures to address this problem. Several aspects of their approach help to advance the state-of-the-art: the authors establish that the pricing problem reduces to solving independently the writer’s and the buyer’s hedging problems with zero initial capital. By further imposing that the risk measures decompose in a way that satisfies a Markovian property, the authors provide dynamic programming equations that can be used to solve the hedging problems for both European and American options. The results are general enough to accommodate situations where the risk is measured according to a worst-case risk measure, as is typically the case in robust optimization. The numerical results presented in this work confirm that when employing an equal risk price both the writer and the buyer end up being exposed to risks that are more similar and on average smaller than what they would experience with other approaches. The third article by MacLean and Zhao (2022) advances the theory and application properties of the celebrated optimal capital growth strategy or Kelly strategy for portfolio selection. As is well known, the Kelly criterion has many desirable properties, such as maximizing the asymptotic longrun growth of capital. However, it is aggressive and can run the considerable short-run risk of losing much of the invested wealth. In their article, the authors provide a method

The continuous improvements in mortality rates and life expectancy of the last century have been ... more The continuous improvements in mortality rates and life expectancy of the last century have been given a great deal of attention by academics, life insurers, financial engineers, and pension planners, particularly in developed countries. Mortality-linked securities such as longevity bonds (EIB & BNP as well as the Swiss Re bond), survivor swaps, and mortality forward (q-forward) have appeared recently in the industry to help operators hedge such risks. A classic survivor bond has been proposed in the literature with coupon payment linked to the life time of the last survivor in an insurance reference portfolio. It appears therefore to be crucial to improve the accuracy of future life expectancy forecasts. In this paper, the authors investigate time-varying dependency associated with common trends that drive regional life expectancy within Canada. The aim is to compare three major models that have recently appeared in the literature, the autoregressive integrated moving average (ARIM...

Quantitative Finance, Jul 11, 2022

Annals of Operations Research, Jul 14, 2020

Journal of Banking & Finance, 2022

OR Spectrum

We apply a dynamic stochastic control (DSC) approach based on an open-loop linear feedback policy... more We apply a dynamic stochastic control (DSC) approach based on an open-loop linear feedback policy to a classical asset-liability management problem as the one faced by a defined-benefit pension fund (PF) manager. We assume a PF manager seeking an optimal investment policy under random market returns and liability costs as well as stochastic PF members’ survival rates. The objective function is formulated as a risk-reward trade-off function resulting in a quadratic programming problem. The proposed methodology combines a stochastic control approach, due to Primbs and Sung (IEEE Trans Autom Control 54(2):221–230, 2009), with a chance constraint on the PF funding ratio (FR) and it is applied for the first time to this class of long-term financial planning problems characterized by stochastic asset and liabilities. Thanks to the DSC formulation, we preserve the underlying risk factors continuous distributions and avoid any state space discretization as is typically the case in multistag...

Computational Management Science, 2018