Presentation - Brandon Schwab and Henk Keffert
2023-12-12 11:00 - 12:30 (Europe/Amsterdam) | 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.

Presentation - Yasmine van der Straten
2024-11-12 11:00 - 12:00 | K 1206, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Yasmine van der Straten, University of Amsterdam

Title: Funding the Fittest? Pricing of Climate Transition Risk in the Corporate Bond Market by Martijn Adriaan Boermans, Maurice Bun, Yasmine Van der Straten
Abstract: We study whether climate transition risk is priced in corporate bond markets and if investors value companies’ green innovation efforts. Using confidential bond-level holdings data and global firm-level data on carbon emissions and green innovation, we find a positive transition risk premium. This premium is smaller for emission-intensive firms that engage in green innovation, suggesting that investors value companies’ efforts to mitigate climate change. We show that European investors, in particular institutional investors, have a higher demand for bonds from emission-intensive firms that engage in green innovation and thus influence yield spreads related to climate transition risk.

Presentation - Carina Fleischer
2024-11-26 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Carina Fleischer, Goethe University Frankfurt
Title: Can Inflation and Monetary Policy Predict Asset Prices?
Abstract: We develop a continuous-time endowment economy model of the US with inflation and the central bank’s interest rate adjustments as observable risk factors. We show that they have predictive power for consumption growth and can explain many features of the aggregate stock and bond market. We derive the price-dividend ratio, the equity premium, the risk-free rate, and the term structure of interest rates. We show in a calibrated model that inflation and the federal funds rate adequately predict those key asset pricing moments. The model offers a novel mechanism to explain the variation in the aggregate price-dividend ratio and the risk-free rate as it relies on observable rather than latent risk factors.

Presentation - Nikolaus Schweizer
2025-02-04 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Nikolaus Schweizer, Tilburg University
Title: Stochastic Monotonicity and Random Utility Models: The Good and The Ugly
Abstract: When it comes to structural estimation of risk preferences from data on choices, random utility models have long been one of the standard research tools in economics. A recent literature has challenged these models, pointing out some concerning monotonicity and, thus, identification problems. In this paper, we take a second look and point out that some of the criticism – while extremely valid – may have gone too far, demanding monotonicity of choice probabilities in decisions where it is not so clear whether it should be imposed. We introduce a new class of random utility models based on carefully constructed generalized risk premia which always satisfy our relaxed monotonicity criteria. Moreover, we show that some of the models used in applied research like the certainty-equivalent-based random utility model for CARA utility actually lie in this class of monotonic stochastic choice models. We conclude that not all random utility models are bad.
This is joint work with Henk Keffert.

Presentation - Bálint Négyesi
2025-02-18 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Bálint Négyesi, Utrecht University
Title: A Deep BSDE approach for the simultaneous pricing and delta-gamma hedging of large portfolios consisting of high-dimensional multi-asset Bermudan options
Abstract: Direct financial applications of the methods introduced in Negyesi et al. (2024), Negyesi (2024) are presented. Therein, a new discretization of (discretely reflected) Markovian backward stochastic differential equations is given which involves a Gamma process, corresponding to second-order sensitivities of the associated option’s price. The main contributions of this work is to apply these techniques in the context of portfolio risk management. Large portfolios of a mixture of European and Bermudan derivatives are cast into the framework of discretely reflected BSDEs. The resulting system is solved by a neural network regression Monte Carlo method proposed in the aforementioned papers. Numerical experiments are presented on high-dimensional portfolios, consisting of several European, Bermudan and American options, which demonstrate the robustness and accuracy of the method. The corresponding Profit-and-Loss distributions indicate an order of magnitude gain in the number of rebalancing dates needed in order to achieve a certain level of risk tolerance, when the second-order conditions are also satisfied. The hedging strategies significantly outperform benchmark methods both in the case of standard delta- and delta-gamma hedging.

Presentation - Paul de Moor and Okke Labout
2025-03-18 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker:
Paul de Moor (Tilburg University)
Title:
Systemic Risk in Financial Networks: The Role of CoCo Bonds
Abstract:
This thesis investigates the effect of contingent capital bonds (CoCos) on systemic risk in interbank networks when banks cross-hold each other’s CoCo bonds. We consider both CoCos with stock price triggers in the model of Balter et al. (2023) and CoCos with accounting-based triggers in the model of Gupta et al. (2021). In the model of Balter et al. (2023), we analyze both the risk of contagion in a stylized banking network and the effect of a system-level shock in a banking network calibrated to data from the European Banking Authority (EBA). In our analysis of contagion effects, we find that the size of losses following a shock to a single bank bank is influenced by the CoCo contract parameters and the structure of the banking network. Our results for the model calibrated to the EBA data set indicate that CoCo debt can prevent bankruptcies following a system-level shock, in sync with reducing value for CoCo bond holders. A larger shock requires more CoCo debt to save banks from default. Furthermore, we find that non-bank creditors can benefit from replacing their claims with CoCo debt, given a sufficiently small recovery rate. In the model of Gupta et al. (2021), we analyze how interbank cross-holding of CoCo debt compares to a situation where CoCo debt is only held by external parties. We find that interbank cross-holding of CoCo debt can increase systemic risk when CoCo bonds are non-dilutive.

Speaker:
Okke Labout (Tilburg University)
Title:
Revisiting the recovery theorem: Why does practice refute theory?
Abstract:
The recovery theorem by Ross (2015) introduced a way to estimate the real-world transition probabilities using state prices. However, for the recovery theorem to work, four assumptions need to hold, and empirical papers show that some of these four assumptions do not hold in reality. In this thesis, I will refine the recovery theorem by adding one additional assumption: “(strong) rational expectations”. Furthermore, I find that if all five assumptions hold, the estimated pricing kernel becomes long-term risk neutral and that in a world where the risk-free (interest) rate is constant, the market is only influenced by idiosyncratic risk.

Presentation - Natascha Jankowski
2025-03-25 11:00 - 12:00 | K 1206, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Natascha Jankowski, University of Konstanz
Title: Impact of Marriage and Homeownership Timing on Financial Wealth
Abstract: Using a quantitative life cycle model of endogenous consumption, savings, housing, and marriage market choices, we investigate the impact of marriage and housing market entry timing on financial wealth. Our results show that individuals who enter the housing market before marriage accumulate more total savings, live in less valuable houses and have higher loan-to-value ratios before marriage but live in more valuable houses and have lower loan-to-value ratios shortly after marriage. However, they have significantly lower consumption levels over the life cycle. Our results can have important implications for designing policies that facilitate individuals’ housing market entry given the changing demographics of first-time homebuyers.

Presentation - Daan van Ederen
2025-04-01 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Daan van Ederen, Achmea Financial Risk Management
Title: Residential building vulnerability functions for winter and severe convective storms
Abstract: Economic losses from winter storms and severe convective storms impose a significant burden on society and are increasing due to exposure growth and climate change. Vulnerability functions play a key role in estimating such losses by describing the relationship between a natural hazard’s intensity and damage to the exposed asset. We provide vulnerability functions for residential buildings that, for the first time, can account for damage from multiple meteorological drivers: wind, precipitation and hail. These compound vulnerability functions are estimated using truncated beta regressions and are based on residence-level insurance claims and ultra-high-resolution meteorological observations. Comparing our vulnerability functions to conventional univariate specifications, shows that the latter underestimate the damage. Moreover, as these storms become wetter, compound vulnerability functions are required to accurately estimate their damage.

Presentation - Martijn de Vries
2025-04-15 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Martijn de Vries, VU Amsterdam
Title: Beliefs and preferences during the life-cycle
Abstract: Consumption and saving over the life-cycle ideally reflect the pension member’s characteristics. However, a holistic perspective of preferences and beliefs of individuals regarding life-cycle decisions remains rather unknown. We field a survey in a representative sample of the Dutch population to quantitatively measure preferences and beliefs in multiple domains. Although there is heterogeneity, we find in the aggregate that risk and time preferences are domain dependent: individuals are more risk averse and more patient in the pension domain, compared to a standard lottery context. Additionally, individuals are loss averse and they distort probabilities, but this does not vary significantly across domains. Risk aversion correlates strongly with other preference parameters and with beliefs about future income. Finally, we find that age, income, and education are significant drivers for preference heterogeneity. Overall, our observations illustrate the importance of individual pension plans and show which characteristics are important for customized design.

Presentation - Marlene Koch
2025-04-29 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Marlene Koch, Maastricht University
Title: Optimal portfolio choice under the presence of shared ownership schemes
Abstract: In this paper, we study government-subsidized shared ownership schemes in the UK that facilitate financially-constrained individuals’ housing market entry by allowing them to buy a share of the property they live in and pay rent for the share they do not own. Moreover, the shared ownership structure can be time-varying, i.e., individuals can adjust the share of the property they own. Using a rich and realistically calibrated life cycle model, we study the impact of access to such shared ownership schemes on individuals’ optimal consumption, savings, and housing decisions. We find that access to shared homeownership is most attractive to young, liquidity-constrained individuals who enter the housing market by buying small fractions of their property and old individuals who are in the process of decumulating their savings and are selling fractions of their property as they get older. Further, it leads to earlier housing market entry, later housing market exit, decreases individuals’ loan-to-value ratios, and reduces their moving activity at old age; all in comparison to a setting in which the individuals’ rent-versus-own decisions are binary.

Presentation - Julian Hölzermann
2025-05-13 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speaker: Julian Hölzermann, University of Southern Denmark
Title: Portfolio Selection and Asset Pricing with Ambiguity: A Two-Stage Evaluation Approach
Abstract: This paper applies a two-stage evaluation procedure to study investors’ portfolio selection and asset pricing consequences in the presence of risk and ambiguity. The two-stage evaluation procedure represents investors’ attitudes towards risk and ambiguity. Investors optimally hold a combination of three funds: a risk-free, a solely risky, and a risky and ambiguous fund. In equilibrium, the risk premia on all assets are determined by their exposure to systemic risk and ambiguity. The results are straightforward to implement and test and well-suited for many types of applications. The results theoretically explain the asset allocation puzzle and the size effect.

Presentation - Javier Garcia and Henk Keffert
2025-05-27 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Speakers: Javier Garcia Gonzalez and Henk Keffert, Tilburg University
Title Javier: Lifecycle investing using housing to attain labor income exposure
Abstract: I study the possibilities that residential real estate investment brings to lifecycle portfolios. My model provides a framework to analyze the potential contributions of this asset class to pension fund portfolios. Moreover, it can rationalize the traditional role of housing, and not stocks, as the primary savings vehicle of households. Labor income is at the core of lifecycle models and house prices have been linked to average income through rents in the literature. On top of consuming housing services, people also consume many labor-intensive services with a cost that is closely related to the average labor income in their region, such as elderly care, health care or education. What makes investment in residential real estate attractive is thus the potential to hedge both housing and labor intensive services by exposing the portfolio to income changes.
Title Henk: Habit formation, income asymmetry, and the optimal design of partner pensions
Abstract: Partner pensions, the benefits paid to a surviving spouse after their partner’s death, play a crucial but often overlooked role in retirement planning for couples. Drops in disposable income can lead to substantial welfare losses, especially when one partner is financially dependent on the other. We develop a rich life-cycle investing model that incorporates habit formation and calibrate it using data on retired Dutch couples to analyse partner pension design. We find a trade-off in partner pension: couples with highly asymmetric income benefit from a larger partner pension, while for more symmetric couples it is optimal to have a lower partner pension. The ability to purchase life insurance at older ages is especially important for asymmetric couples to reduce welfare losses if there is insufficient partner pension. In the Netherlands, it is common practice to pay 70% of the deceased’s pension income to the survivor. Even in the most asymmetric cases, a 70% partner pension typically leads to an increase in consumption after the death of the breadwinner, suggesting that the 70% is rather high.
Important factors that influence the optimal partner pension for a couple are their preferences and the economic benefits of being in a couple. The more economical it is to be in a couple, the larger the partner pension should be to compensate not only for lower income but also the loss of the economies of scale benefit. The more risk averse the couple is or the stronger their degree of habit formation, the larger their aversion is to consumption drops and the larger the partner pension should be. Many European countries use a one-size-fits-all approach, which may seem restrictive. However, even in the most extreme scenarios we consider, the optimal one-size-fits-all solution only leads to a welfare loss of about 2%.
Joint work with: Anja De Waegenaere and Nikolaus Schweizer

Presentation - Koos Gubbels
2025-06-10 11:00 - 12:00 | K 1203, Koopmans building, Warandelaan 2, Tilburg, Noord Brabant, 5037 AB, Netherlands
Title: Regularized Spectral Dynamics for High-Dimensional Copulas
Abstract: We introduce spectral dynamics for high-dimensional, asymmetric, tail-dependent copulas in combination with non-linear shrinkage of the copula dependence matrix. Our new copula model is based on evolution and regularization equations for the eigenvalues of the copula correlation matrix in order to achieve a parsimonious dynamic structure combined with robust estimation in high dimensions. We compare the performance of our dynamic spectral copula model with recently proposed clustering-based dynamic factor copula models. In simulation studies, we find that our copula model is highly competitive when the cluster factor copula is the true model, and that it outperforms other copulas in more general situations. In our empirical application, we study the high-dimensional dynamics of the global financial market using 100 stocks from 10 different countries and 10 different industry sectors. In this heterogenous setting, restrictive group-based dependence structures perform sub-optimally, while the spectral method captures the primary geographic and industry related co-movements, leading to improved out-of-sample performance. The spectral dynamics also reveal that global financial markets undergo orthogonal contractions in times of financial crises, resulting in reduced diversification potential and increased global systemic risk.
