Sensitivity analysis of long-term cash flows

This paper conducts a sensitivity analysis of long-term cash flows. The price of the cash flow at time zero is given by the pricing operator of a Markov diffusion acting on the cash flow function. We study the extent to which the price of the cash flow is affected by small perturbations of the underlying Markov diffusion. The main tool is the Hansen–Scheinkman decomposition, which is a method to express the cash flow in terms of eigenvalues and eigenfunctions of the pricing operator. By incorporating techniques developed by Fournié et al. (Finance Stoch. 3:391–412, 1999), the sensitivities of long-term cash flows can be represented via simple expressions in terms of eigenvalues and eigenfunctions.     

Convex duality in optimal investment and contingent claim valuation in illiquid markets

This paper develops duality theory for optimal investment and contingent claim valuation in markets where traded assets may be subject to nonlinear trading costs and portfolio constraints. Under fairly general conditions, the dual expressions decompose into three terms, corresponding to the agent’s risk preferences, trading costs and portfolio constraints, respectively. The dual representations are shown to be valid when the market model satisfies an appropriate generalization of the no-arbitrage condition and the agent’s utility function satisfies an appropriate generalization of asymptotic elasticity conditions. When applied to classical liquid market models or models with bid–ask spreads, we recover well-known pricing formulas in terms of martingale measures and consistent price systems. Building on the general theory of convex stochastic optimization, we also obtain optimality conditions in terms of an extended notion of a “shadow price”. The results are illustrated by establishing the existence of solutions and optimality conditions for the nonlinear market models recently proposed in the literature. Our results allow significant extensions including nondifferentiable trading costs which arise, e.g., in modern limit order markets where the marginal price curve is necessarily discontinuous.     

Does prevention as an investment strategy explain the intention to purchase guarantees for unit-linked life insurance?

The present paper examines the relationship between prevention as an investment strategy and the perceptions about unit-linked insurance on the intention to purchase interest rate guarantees for such products. We propose a framework in which the relationship between adopting prevention as an investment strategy, and the intention to purchase interest rate guarantees is moderated by the level of financial literacy of the individual and this interaction is mediated by the perceptions regarding unit-linked insurance. We find support for our conceptual model by testing it on a sample of 1017 financial decision makers in Germany using a moderated mediation analysis. The paper therefore offers insights into the decision-making process of financial consumers in Germany and presents practical implications for designing products for age-old provision.     

Online banking services: a meta-analytic review and assessment of the impact of antecedents and consequents on satisfaction

This paper provides a meta-analysis of the generalizations in the relationships between the antecedents and consequents of satisfaction with online banking services. In total, 118 observations were analysed, with a sample of 49,607 respondents in 39 published articles from studies indexed in ten databases (Jstor, Emerald, PsycINFO, Taylor & Francis, Elsevier Science Direct, Scopus, ProQuest, SciELO, Google Scholar and EBSCO). Specifically, for the data analysis, we used the correlation coefficient r (plus χ², f test, t test, z test and β values). The results showed that constructs related to uncertainty, as evoked by online devices, system performance, quality of device content and online banking device structures, are significant and positive antecedents of consumer satisfaction. We also found that satisfaction with online banking services promotes trust and loyalty. Finally, we also detected that the relationship between reliability, satisfaction and service quality is stronger among Western banking consumers.     

Developing technologically induced environments: the case of the Nigerian banking sector

This paper addresses issues regarding prevalent values and themes in technologically induced environments in terms of planning, development, and implementation. Emerging themes (efficiency, usability, control, and security) are debated and developed in relation to underpinning values (quality, education, and reach/concern) which provide a comprehension of technological adoption in the developing economy of Nigeria. In addition, problems relating to new product development, innovation processes, synthesising marketing technologies, and strategic planning are investigated and explored. Discussion on technological adoption and use produces diverse perspectives and interpretations, which consequently prompts questions on its nature and understanding in developing societies. Assessing life-world perspectives and interpretations through phenomenological hermeneutics and consumer and communication models this study examines levels of technologically induced customer services in the banking services sector from a Nigerian perspective.     

Women are scaredy-cats and men are conquerors?

The European legal framework requires that financial consultants assess their clients’ risk tolerance before advising them on investments. The study aims at further testing an alternative measure to quantify the risk attitudes of investors: The Implicit Association Test (IAT). This study examines differences in implicit, unconscious, and explicit cognitive attitudes of men and women. The results of the IAT are compared with their answers from a risk tolerance questionnaire used by practitioners and self-selected asset allocation (portfolio). The data show that implicit attitude, and, thus, unconscious and uncontrolled thinking, can differ from conscious processes. Furthermore, in this study, there is no gender gap in risk attitude and risk tolerance. The findings suggest that experience and financial knowledge are likely the most important determinants of risk attitudes with no significant difference between men and women.     

Optimal liquidation under stochastic liquidity

We solve explicitly a two-dimensional singular control problem of finite fuel type for an infinite time horizon. The problem stems from the optimal liquidation of an asset position in a financial market with multiplicative and transient price impact. Liquidity is stochastic in that the volume effect process, which determines the intertemporal resilience of the market in the spirit of Predoiu et al. (SIAM J. Financ. Math. 2:183–212, 2011), is taken to be stochastic, being driven by its own random noise. The optimal control is obtained as the local time of a diffusion process reflected at a non-constant free boundary. To solve the HJB variational inequality and prove optimality, we need a combination of probabilistic arguments and calculus of variations methods, involving Laplace transforms of inverse local times for diffusions reflected at elastic boundaries.     

Approximation of forward curve models in commodity markets with arbitrage-free finite-dimensional models

In this paper, we show how to approximate Heath–Jarrow–Morton dynamics for the forward prices in commodity markets with arbitrage-free models which have a finite-dimensional state space. Moreover, we recover a closed-form representation of the forward price dynamics in the approximation models and derive the rate of convergence to the true dynamics uniformly over an interval of time to maturity under certain additional smoothness conditions. In the Markovian case, we can strengthen the convergence to be uniform over time as well. Our results are based on the construction of a convenient Riesz basis on the state space of the term structure dynamics.     

Fatou property,representations, and extensions of law-invariant risk measures on general Orlicz spaces

We provide a variety of results for quasiconvex, law-invariant functionals defined on a general Orlicz space, which extend well-known results from the setting of bounded random variables. First, we show that Delbaen’s representation of convex functionals with the Fatou property, which fails in a general Orlicz space, can always be achieved under the assumption of law-invariance. Second, we identify the class of Orlicz spaces where the characterization of the Fatou property in terms of norm-lower semicontinuity by Jouini, Schachermayer and Touzi continues to hold. Third, we extend Kusuoka’s representation to a general Orlicz space. Finally, we prove a version of the extension result by Filipovi? and Svindland by replacing norm-lower semicontinuity with the (generally non-equivalent) Fatou property. Our results have natural applications to the theory of risk measures.