Presentation - Christoph Hambel
2023-02-07 11:00 - 12:30 (Europe/Amsterdam) | Online
Speaker: Christoph Hambel
Title: Pricing carbon under uncertainty: accuracy of simple rules
Co-authors: Ton van den Bremer and Rick van der Ploeg

Presentation - Frank de Jong
2023-02-14 11:00 - 12:30 | RTZ 502, Professor Cobbenhagenlaan 113, Tilburg, 5037 DB, Netherlands
Speaker: Frank de Jong
Title: Hedging Inflation

Presentation - Anne Balter
2023-03-07 11:00 - 12:30 | RTZ 502, Professor Cobbenhagenlaan 113, Tilburg, 5037 DB, Netherlands
Speaker: Anne Baltar
Title: Model Ambiguity versus Model Misspecification in Dynamic Portfolio Choice and Asset Pricing
Co-authors: Pascal Maenhout from INSEAD and Hao Xing from Boston University
Paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4259774

Presentation - Ki Wai Chau
2023-04-04 11:00 - 12:30 | RTZ 502, Professor Cobbenhagenlaan 113, Tilburg, 5037 DB, Netherlands
Speaker: Ki Wai Chau
Title: Comparative Risk Aversion vs. Threshold Choice in the Omega Ratio
Abstract: We study conditions under which the threshold parameter in the Omega ratio represents risk aversion in the sense of monotonicity of risk premia. To this end, we derive asymptotic expansions for risk premia associated with taking a small additional risk on top of a background risk. These risk premia have the expected monotonicity behavior if, roughly speaking, the variance of the additional risk decreases with the background risk and if the density of the background risk is log-concave. When these conditions are violated, the threshold in the Omega ratio does not represent risk aversion in general. Finally, we compare our sufficient conditions for the Omega ratio to those that are needed to guarantee monotonicity of risk premia with an expected utility criterion under background risk. We argue that the conditions that are needed for the Omega threshold to represent risk aversion are comparable to those that are needed for expected utility with exponential utility functions.
Paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4318658

Presentation - Matthijs
2023-05-16 11:00 - 12:30 | RTZ 502, Professor Cobbenhagenlaan 113, Tilburg, 5037 DB, Netherlands
Title: Solidarity reserve
Abstract: We examine the reduction of the year on year probability of a pension cut by using the solidarity reserve in the new Dutch pension contract. We find that the use of the solidarity reserve leads to a significant reduction in the probability of a pension cut. The significance of the reduction is determined by the available capital in the solidarity reserve to soothe shocks. Once the available capital in the solidarity reserve to soothe additional shocks reaches the zero-bound, the probability of a pension reduction does not differ from that of a regular variable annuity. Finally, a drop in the maximum contribution from the solidarity reserve to pensioners, may lead to large reductions in pension income.

Presentation - Thomas Grünthaler
2023-05-30 11:00 - 12:30 | RTZ 502, Professor Cobbenhagenlaan 113, Tilburg, 5037 DB, Netherlands
Speaker: Thomas Grünthaler
Title: Fed Tails: FOMC Announcements and Stock Market Uncertainty
Abstract: Uncertainty and monetary policy decisions in the U.S. interact with one another. Contrary to the common notion that FOMC announcements resolve a non-trivial amount of economic uncertainty, we find that the announcement commands a sizable left-tail premium, which builds up a few days in advance. The dominant role of left-tail uncertainty is unique to FOMC announcements, the behavior varies over time, significantly predicts future rate decisions, and is confirmed through frequent discussions by FOMC members. We attribute the left-tail uncertainty premium to supply shocks in the market for crash insurance.
Paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3379561

Presentation - Lieske Coumans
2023-09-19 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands

Presentation - Stephen Boumans
2023-10-03 13:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands

Presentation - Javier García González
2023-10-17 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Javier Garcia Gonzalez, Tilburg University
Title: Welfare effects due to collective investments based on heterogeneous preferences
Abstract: Collective investment involves aggregating the individual objectives of a group with heterogenous risk preferences and risk capacities, and creating an appropriate investment plan. We consider the problem of a planner who aggregates individual objectives using the maxmin criterion, and faces discrete trading and leverage constraints. The maxmin multi-period problem is solved numerically via population games. Additionally, we explore clustering for solutions that range from individually tailored plans to a single investment plan for the whole collective, as well as the use of leverage.

Presentation - Kateryna Chekriy and Thomas Grünthaler
2023-10-31 11:00 - 12:30 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
1st speaker: Thomas Grünthaler, University of Münster
Title: Risk Premia and Option Intermediation.
Abstract: Equity index risk premia vary more than can be explained by market risks and pricing models. I show that index option intermediaries cause variation in risk premia to manage option positions. When expected volatility is low, intermediaries hold risky short positions. Increasing risk and liquidity premia compensate intermediaries for the risk exposure and lower subsequent demand. When expected volatility is high, intermediaries transfer risky short positions to investors. Intermediaries induce sell orders by quoting relatively higher sell prices and charging wider effective spreads for buyer-initiated trades. As a result, intermediaries’ positions are often riskless when high volatility realizes. Tighter constraints in the financial sector transmit to option intermediaries and create a reluctance to hold positions. The reluctance drives level and variation in crash risk premia independent of market risks. My results suggest that financial institutions’ risk tolerance integrates option markets with other markets.

2nd speaker: Kateryna Chekriy, University of Duisburg-Essen
Title: Net-Zero Transition Paths: Facts and Fiction
Abstract: We develop a probabilistic model to analyze net-zero commitments of companies. It allows us to incorporate the inherent variability of emission reductions of a particular company. In our model, carbon emissions follow a geometric Brownian Motion, where the drift and the volatility are based on historical emission reduction rates. The model is furthermore extended to the one with a non-constant carbon emissions’ drift. Using carbon emissions, the carbon budget can be defined, which is the cumulative amount of carbon emissions over a specified time range and can be used to dynamically track the remaining carbon budget prescribed by a net-zero scenario. The net-zero scenario pathway is calibrated to a firm of interest considering its emissions reduction targets, including the net-zero target. Using estimated carbon emissions’ parameters, we compute the probability of the firm reaching its emission reduction targets. Moreover, we provide the probability of respecting the carbon budget implied by the calibrated net-zero pathway. Both probabilities are adjusted with the arrival of new emissions data. The time series of probabilities of respecting the pledged carbon budget can be used for monitoring and regulation of the corporate net-zero transition as well as to measure firm’s exposure to climate risk.

Presentation - Jan Wollmann and Alexander Blasberg
2023-11-14 11:00 - 12:30 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
1st speaker: Jan Wollmann, University of Duisburg-Essen
Title: Prices vs Quantity: Optimal Policy Design of The Market Stability Reserve
Abstract: In its current implementation, the market stability reserve (MSR) of the EU Emissions Trading System (EU ETS) defines a band from 400 to 833 million permits that should be in circulation every year. Once a year, if the current number of permits in circulation lies outside this band, permits are removed from or added to the MSR according to pre-specified rules that use the quantity of permits in circulation as a calculation basis. In light of planned EU ETS extensions to additional sectors, each with highly correlated firms within, the question arises whether a quantity-based trigger for the adjustment mechanism is still the preferred instrument of choice. The purpose of this paper is to analyse and compare the behaviour of different adjustment mechanisms, primarily quantity and price based, in the presence of uncertainty and non-trivial transaction costs. We consider a discrete time optimal control problem with cost functionals comparable to the ones used in Emissions trading systems with cap adjustments (2016) by Kollenberg and Taschini and Optimal Dynamic Regulation of Carbon Emissions Market: A Variational Approach (2021) by Aïd and Biagini. The commonly neglected trading friction is included as an individualised parameter and additional constraints on the solution space of the optimal control are imposed. We include random shocks to carbon emissions and certificate allocation and explicitly solve the model for small numbers of firms in order to analyse the reaction of the system to different supply adjustment mechanisms.
Keywords: EU ETS reform, Dynamic allocation, Policy design, Responsiveness, Transaction costs

2nd speaker: Alexander Blasberg, University of Duisburg-Essen
Title: Climate Risk and Credit Risk: Theory and Empirics
Abstract: Given the potentially severe financial consequences due to climate change, understanding how climate risks contribute to firms’ credit risk is essential. Building on a Merton-type model, we propose a new model that introduces a random growth adjustment factor in the firm value dynamics to reflect the depreciation due to climate risks. We also review the current state of the literature on how structural models of credit risk are employed to model the impact of climate risk on financial markets. Motivated by the theoretical models, we utilize the information contained in the spreads of Credit Default Swap (CDS) contracts to construct a market-implied, forward-looking carbon risk (CR) factor. We examine empirically how the scope and speed of economic transformation vary across jurisdictions, sectors, and over time. Explicit carbon emission pricing enables lenders to sharpen their assessments. The breadth of the regulation intensifies financial repercussions from carbon risk. The impact differs significantly across industries, indicating that the market identifies which sectors are better poised for a transition to a low-carbon economy. Lenders expect that adjustments in carbon regulations in Europe will cause relatively larger policy-related costs in the near future.

Presentation - Carina Fleischer
2023-11-28 11:00 - 12:00 | K 1206, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Carina Fleischer, University of Frankfurt
Title: How Well do Women sell?
Joint work with Holger Kraft and Farina Weiss
Abstract: This paper is the first to analyze the performance of non-professional individuals selling personal belongings. We study a novel hand-collected data set from a popular German TV show and find that women obtain on average about 7.3% less than men. This gap cannot fully be explained by known moderators for professionals. We document a novel relationship between age, education and negotiation outcomes of females. In particular, we find that midlife women working in the industry perform as well as men, whereas most other women obtain much less than men. Remarkably, female teams perform significantly better than single females.

Presentation - Brandon Schwab and Henk Keffert
2023-12-12 11:00 - 12:30 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
1st speaker: Brandon Schwab, University of Hannover
Title: Advancing loss reserving: a hybrid neural network approach for individual claim development prediction
(Authors: Judith C. Schneider and Brandon Schwab)

2nd speaker: Henk Keffert, Tilburg University
Title: Optimal investment and consumption for retired couples with habit formation
Abstract: In this presentation, we will discuss optimal investment and consumption decisions for retired couples with habit formation preferences. We incorporate life-time uncertainty for both members of the couple, investment in a risky and risk-free asset, retirement wealth that consists of liquid wealth and annuities, and internal additive habit formation preferences. We will use the model to quantify the welfare effects of several partner pension designs.

Presentation - Christoph Hambel
2024-02-06 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Title: Pricing in Transition and Physical Risks: Carbon Premiums and Stranded Assets
Speaker: Christoph Hambel
Co-author: Frederick van der Ploeg
Abstract: Asset pricing and climate policy are analyzed in a global DSGE model where consumption goods are produced by both a green and a carbon-intensive sector and reallocation of capital is subject to intrasectoral adjustment costs. We allow for several types of economic and climate-related risks including irreversible tipping of the climate system. Transition risks consist of technological breakthroughs in negative emissions technologies and changes in political regime, where the latter are either business as usual, optimal climate policy, or a temperature cap. Climate and technological tipping can affect political tipping. We show how transition and physical risks affect the carbon price, the risk-free rate, the risk premiums of green and brown assets. Transition risks can trigger asset stranding if a government introduces a temperature cap and bans further carbon emissions. These risks are priced in and lead to sizable carbon risk premiums.

Presentation - Mogens Steffensen
2024-02-20 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Mogens Steffensen, University of Copenhagen
Title: Optimal consumption, investment, and insurance under state-dependent risk aversion
Abstract: We consider classes of dynamic decision problems where an investor maximizes utility but faces random preferences. We consider three versions of the problem. In one version, the investor optimizes expected utility where the expectation is taken with respect to both financial and preference uncertainty. That is based on Steffensen and Søe (2023). Another version is based on certainty equivalents. We tackle the time-consistency issues arising from that formulation by applying the equilibrium theory approach. The case where the investor learns nothing about his preferences as time passes is based on Desmettre and Steffensen (2023). We also discuss another case where risk aversion is an observed stochastic process.
References:
Desmettre, S., & Steffensen, M. (2023). Equilibrium investment with random risk aversion. Mathematical Finance, 33, 946–975. https://doi.org/10.1111/mafi.12394
Steffensen, M., & Søe, J. (2023). Optimal consumption, investment, and insurance under state-dependent risk aversion. ASTIN Bulletin: The Journal of the IAA, 53(1), 104-128. doi:10.1017/asb.2022.25

Presentation - Bas Werker
2024-03-05 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Bas Werker, Tilburg University
Title: Redesign of the Dutch Pension System
We discuss the ongoing redesign of the Dutch pension system. We consider Pareto efficiency of risk sharing in funded pension systems, the notion of ‘solidarity’ and the link to the Rao-Blackwell theorem. The presentation will not be based on a single paper, but more focus on ‘impact’ based on a series of existing results in the literature.

Presentation - Koos Gubbels
2024-03-19 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Koos Gubbels, Tilburg University
Title: Principal Component Copulas for Capital Modelling
Abstract: We introduce a class of copulas that we call Principal Component Copulas. This class intends to combine the strong points of copula-based techniques with principal component-based models, which results in flexibility when modelling tail dependence along the most important directions in multivariate data. The proposed techniques have conceptual similarities and technical differences with the increasingly popular class of factor copulas. Such copulas can generate complex dependence structures and also perform well in high dimensions. We show that Principal Component Copulas give rise to practical and technical advantages compared to other techniques. We perform a simulation study and apply the copula to multivariate return data. The copula class offers the possibility to avoid the curse of dimensionality when estimating very large copula models and it performs particularly well on aggregate measures of tail risk, which is of importance for capital modeling.
References:
K.B. Gubbels, J.Y. Ypma and C.W. Oosterlee, Principal Component Copulas for Capital Modelling, submitted to Journal of Business & Economic Statistics, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4669797

Presentation - Jorgo Goossens
2024-04-02 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Jorgo Goossens
Title: Are risk preferences stable for impactful financial decisions?
Abstract: Numerous methods to elicit people’s risk preferences have evolved and evidence suggests that risk preferences may vary considerably when measured with different methods. We test this “risk elicitation puzzle” amongst 1600 pension fund members for which the stakes are large and their decisions are impactful. Based on a within-subject design using three well-known risk preference elicitation methods tailored to the pension domain, we find that the different methods give rise to varying estimates of risk preferences at the individual and aggregate level. We perform an in-depth comparison of the three risk elicitation tasks using simulation exercises. The observed heterogeneity in risk preference estimates across elicitation methods is similar to the heterogeneity arising from independent random draws from the choice distributions in the experiment. Observed risk preference instability across methods is more prevalent for individuals that are older, blue-collar workers, and lower income earners.
Co-author: Marike Knoef

Presentation - Claus Munk
2024-04-04 11:15 - 12:15 | Beton conference room, LocHal, Burgemeester Brokxlaan 1000, Tilburg, Noord Brabant, 5041 SG, Netherlands
Presentation moved to Netspar Workshop “Collective investments for heterogeneous individuals”.
Registration: https://www.netspar.nl/evenement/collective-investments-for-heterogeneous-individuals/

Speaker: Optimal retirement saving and dissaving
Title: Claus Munk

Presentation - Nikolaus Schweizer
2024-04-16 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Nikolaus Schweizer, Tilburg University
Title: Performance measurement with the Omega ratio: Some pitfalls and how to avoid them
Abstract: The Omega ratio is a risk-return ratio which compares the expected gains above a given threshold to the expected losses below it. Ever since its proposal by Keating and Shadwick (2002), ranking risky prospects by the Omega ratio has been a popular alternative to utility-based approaches on the one side and simplistic criteria like the Sharpe ratio on the other. Especially practitioners have found it useful to plot Omega ratios against the threshold, interpreting the resulting rankings in terms variations in risk appetite. In this presentation, I will show that some care is necessary to make sure that rankings based on the Omega ratio are consistent with rational, risk-averse preferences. Moreover, I will show that the interpretation of the threshold parameter in terms of risk appetite is only valid under somewhat restrictive conditions. However, similar conditions are needed for utility-based performance criteria as well.
This presentation is based on two papers:
S. Balder & N. Schweizer. Risk aversion vs. the Omega ratio: Consistency results, Finance Research Letters, 21, p. 78-84, 2017.
A.G. Balter, K.W. Chau & N. Schweizer. Comparative Risk Aversion vs. Threshold Choice in the Omega Ratio, Omega, 123, 102992, 2024.

Presentation - Anja De Waegenaere
2024-05-07 11:00 - 12:00 | CZ 117, Cobbenhagen building, Warandelaan 2, Tilburg, Noord Brabant, 5037 EN, Netherlands
Title: Risk sharing in Group Self Annuitization (GSA) schemes with heterogeneous participants
Speaker: Anja De Waegenaere
Abstract: We analyze risk sharing in heterogeneous Group Self Annuitization Schemes (GSAs). In a GSA scheme, a group of individuals pools their funds to finance income until death without the intervention of an insurer. At the beginning of each period, the accumulated funds of participants that died in the previous period are redistributed over the surviving participants. Immediately thereafter, each surviving participant as well as each participant that newly enters the pool receives a benefit payment, and the remaining funds are invested according to the investment strategies chosen by the participants. We consider GSAs in which participants can be heterogeneous in terms of wealth, survival rates, and investment strategy. We find that while heterogeneity in wealth and/or survival rates can have a substantial impact on the efficiency of risk sharing, the effect of heterogeneity in investment risk is negligible except for very small groups.

Presentation - Floor van der Sanden and Djep Doreleijers
2024-05-14 11:00 - 12:30 | K 7 paviljoen, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speakers: Floor van der Sanden and Djep Doreleijers, Tilburg University
Title Floor: Is there a Carbon Premium?
Abstract: Climate change necessitates global action, with policy regulations and shifting consumer attitudes introducing additional risks in the journey towards a greener economy. Assessing how these risks affect firm valuation, particularly for polluting versus eco-friendly firms, is vital. Besides varied theoretical perspectives, empirical observations reflect diverse conclusions on the link between environmental and financial performance. Analyzing data from 2007 to 2023 across more than 10,000 firms in 90 countries, we examine the sensitivity of research findings to methodological choices. Our main discovery supports a negative carbon premium, indicating eco-friendly firms outperform. However, we demonstrate that this conclusion is contingent upon several factors, including the treatment of unscaled emissions, the inclusion of vendor-estimated emissions, temporal considerations regarding emissions and accounting data, and, to some extent, the model employed, distinguishing between panel regression analysis and portfolio analysis. These results underscore the need for careful interpretation of previous research on the environmental-financial performance association.
Title Djep: Optimal Consumption, Investment, and Insurance Strategy Over the Life-Cycle for a Regret-Averse Investor
Abstract: Regret is a very common and persistent emotion among investors (Zeelenberg et al, 1998; Zeelenberg, 1999). However, there has been done relatively little research on optimal asset allocation in combination with regret theory (Bell, 1982; Loomes and Sugden, 1982). This presentation discusses the research done on the optimal consumption-investment[1]insurance strategy for a risk- and regret-averse investor who is subject to biometric risks. This research extended the work done by Hambel et al. (2022). The preferences of the investor are assumed to be given by a regret-adjusted stochastic differential utility specification (Duffie and Epstein, 1992). An alternative multiplicative regret utility function and regret-adjusted normalized aggregator function have been proposed to model the preferences of the investor. Closed-form solutions have been derived for any arbitrary elasticity of intertemporal substitution parameter value. It has been proven that it is optimal for a risk- and regret-averse agent to invest more into the risky asset than for a purely risk[1]averse agent under a weak condition.

Presentation - Yuan Tian
2024-05-28 11:00 - 12:00 | K 1206, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Yuan Tian from Ryukoku University, Kyoto, Japan
Title: The Interaction of Leverage and Liquidity Management with Dynamic Investment
Abstract: Aiming to provide a quantitative guidance for integrating the liability management (such as debt and equity financing) with the asset management (such as investment and liquidity reserve maintenance), we develop a theoretical model of dynamic investment, debt financing, dividend payout, and external equity financing/liquidation for financially constrained firms. Mathematically, to solve the recursive equilibrium of the problem to determine the equity and debt values, we formulate it as a variational inequality with a fixed-point structure embedded. Compared to the traditional corporate finance literature that mainly focuses on capital structure, we highlight the central importance of joint management of leverage and liquidity in corporate decision making in the presence of external financing costs. In particular, a novel trade-off (liquidity-boosting vs. liquidity-draining) brought by debt enables us to shed light on the interaction of leverage and liquidity management. Rich implications through the lens of liquidity on Tobin’s q and investment, underestimation of debt overhang, integration of pecking order and trade-off theories, deleveraging are also provided.

Presentation - Anne Balter
2024-06-11 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Anne Balter, Tilburg University
Title: Systematic longevity risk: The willingness to pay
Authors: Anne G. Balter, Malene Kallestrup-Lamb (Aarhus University), Mathias D. Plovst (Aarhus University)
Abstract: Increasing life expectancy has led to a global transition in pension systems towards more variable products in which risk is explicitly borne by the participants, necessitating a thorough understanding of longevity risk. This risk is explicitly transferred to policyholders contrasting with earlier implied hedges. Our goal is to quantify longevity risk through its impact on welfare, i.e., the willingness to pay. Longevity risk can be categorized into idiosyncratic and systematic, with the latter, representing changes in life tables, being the focus of our study. The risk is determined as life expectancy changes over time beyond the already incorporated projected increase. Addressing the gap in quantifying systematic longevity risk, we introduce a multiple-horizon approach in which we calculate the realized “unexpected” deviations in best estimated survival rates due to arrival of new observations in the mortality model. Our findings unveil that the willingness to pay to avoid the systematic longevity risk, i.e., the risk premium required to bear this risk, is substantial. We conduct extensive sensitivity analyses, exploring cross-country variations, different stochastic longevity models, and gender differentials, amongst others, contributing novel insights to the literature on the size of systematic longevity risk.

Presentation - Henk Keffert
2024-06-25 11:00 - 12:00 | K 1206, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Henk Keffert, Tilburg University
Title: Optimal investment and consumption for retired couples with habit formation
Abstract: In this presentation, we will discuss optimal investment and consumption decisions for retired couples with habit formation preferences. We incorporate life-time uncertainty for both members of the couple, investment in a risky and risk-free asset, retirement wealth that consists of liquid wealth and annuities, and internal additive habit formation preferences.
Current practice in the Netherlands is that the partner pension payment is typically 70% of the annuity benefits originally paid to the deceased spouse. Our results suggest that in many situations this can lead to an increase in consumption of the surviving spouse, which indicates that 70% is higher than what is needed to maintain the same standard of living for the surviving spouse. Factors that influence the size of this consumption change are the economies of scale of being in a couple and the division of annuity benefits between the partners. On the other hand, in cases where annuity income is highly asymmetric between the two partners, percentages lower than 70% can lead to considerable welfare losses. Compared to power utility preferences, couples with habit formation invest less in the risky asset, and consumption changes after the death of a partner are smoother.

Presentation - Christoph Hambel
2024-09-03 11:00 - 12:00 | K 1206, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Christoph Hambel, Tilburg University (Department of Econometrics and OR)
Title: Biodiversity Risks and the Carbon Premium

Presentation - Javier García González
2024-09-17 11:00 - 12:00 | K 7 paviljoen, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Javier Garcia Gonzalez, Tilburg University (Department of Econometrics and OR)
Title: Daily leverage and long-term investing using leveraged exchange traded funds

Presentation - Antonis Papapantoleon
2024-10-01 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Antonis Papapantoleon, TU Delft
Title: Model-free and data driven methods in mathematical finance
Abstract: Academics, practitioners and regulators have understood that the classical paradigm in mathematical finance, where all computations are based on a single “correct” model, is flawed. Model-free methods, were computations are based on a variety of models, offer an alternative. More recently, these methods are driven by information available in financial markets. In this talk, we will discuss model-free and data driven methods and bounds and present how ideas from probability, statistics, optimal transport and optimization can be applied in this field.

Presentation - Daniel Mantilla García
2024-10-15 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Daniel Mantilla-Garcia, Universidad de Los Andes
Title: Retirement Income Loss Control Strategies
Abstract: Target income strategies allocate wealth between an income-hedging portfolio and a risky performance-seeking portfolio (PSP) during the accumulation phase, aiming to secure a strictly increasing income floor level as the retirement date nears. However, the secured floor of previous target income strategies only accounts for the retirement income level that can be secured using risk-free interest rates. This paper extends those strategies to also secure a portion of the cumulative gains obtained from the risky PSP, to account for the individuals’ income loss aversion. Our empirical analysis shows economic gains in around 90% of the historical scenarios, and large risk reduction as retirement nears with respect to the strategies without loss control. Furthermore, the strategies with loss control present less disperse retirement benefits across cohorts.

Presentation - Jun-Hee An
2024-10-29 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Jun-Hee An, Tilburg University
Title: Welfare Effects of Uniform Variable Annuities for Individuals with Different Educational Levels (Jun-Hee An, Anja De Waegenaere, and Theo Nijman)
Abstract: This paper examines the welfare losses or gains that individuals with different educational levels face when they are offered a variable annuity that is not tailored to their risk preferences and/or survival rates. We combine education-specific mortality projections of the Dutch population with a range of reasonable risk preferences to quantify the welfare losses due to mismatches in mortality rates and risk preferences. We find that for individuals with lower education levels, the welfare losses due to inadequate mortality assumptions can be substantially bigger than the welfare losses they face from an inadequate risk preference assumption. More generally, we find that ignoring the effects of heterogeneity in mortality rates can lead to a large over- or underestimation of the welfare effects of uniform variable annuities. Our study therefore highlights the importance of considering differences in survival rates when evaluating the welfare effects of uniform annuities offered to annuitants with different educational levels.
