Christian‐Oliver Ewald

University of Glasgow

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Zhaojun Yang

Southern University of Science and Technology

Wen-Kai Wang

National University of Kaohsiung

Tak Kuen Siu

Macquarie University

Yajun Xiao

Xi’an Jiaotong-Liverpool University

Ankush Agarwal

Western University

Erik Haugom

Inland Norway University of Applied Sciences

Ståle Størdal

Inland Norway University of Applied Sciences

Yihan Zou

Xihua University

Gudbrand Lien

Inland Norway University of Applied Sciences

Yongjie Wang

Adam Smith Institute

Cooperative Institutions

University of Glasgow

Adam Smith Institute

Inland Norway University of Applied Sciences

Norwegian University of Life Sciences

University of St Andrews

University of Sydney

Hunan University

Southeast University

Hubei University of Education

University of Kaiserslautern

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Hedging longevity risk in defined contribution pension schemes

arXiv (Cornell University) (2019)

Ankush Agarwal Christian‐Oliver Ewald Yongjie Wang

Pension schemes all over the world are under increasing pressure to efficiently hedge the longevity risk posed by ageing populations. In this work, we study an optimal investment problem for a defined contribution pension scheme which decides to hedge the longevity risk using a mortality-linked security, typically a longevity bond. The pension scheme invests in the risky assets available in the market, including the longevity bond, by using the contributions from a representative scheme member to ensure a minimum guarantee such that the member is able to purchase a lifetime annuity upon retirement. We transform this constrained optimal investment problem into an unconstrained problem by replicating a self-financing portfolio of future contributions from the member and the minimum guarantee provided by the scheme. We solve the resulting optimisation problem using the dynamic programming principle and through a series of numerical studies reveal that the longevity risk has an important impact on the performance of investment strategies. Our results provide mathematical evidence supporting the use of mortality-linked securities for efficient hedging of the longevity risk.

Longevity Risk

Hedge

Investment

10.48550/arxiv.1904.10229

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Parental Care as a Differential Game: A Dynamic Extension of the Houston-Davies Game

SSRN Electronic Journal (2008)

Christian‐Oliver Ewald John M. McNamara Alasdair I. Houston

An interpretation of the conflict between male and female parents during the process of caring for their common offspring by means of Game Theory was given in Houston and Davies. [A.I. Houston, N.B. Davies, The evolution of cooperation and life history in the dunnock Prunella modularis, in: R.M. Sibly, R.H. Smith (Eds.), Behavioral Ecology, Blackwell Scientific Publications, 1985, pp. 471-487]. Mathematically, this model represents a static game with continuous strategy sets. Recently, this model was reconsidered in a dynamic discrete time framework which also included state dependencies [J.M. McNamara et al., A dynamic game-theoretic model of parental care, J. Theor. Biol. 205 (2000) 605-623]. In this article, we give an interpretation of the parental care conflict in continuous time by means of a differential game with state dependent strategies.

Differential game

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MARKETS FOR INFLATION‐INDEXED BONDS AS MECHANISMS FOR EFFICIENT MONETARY POLICY

Mathematical Finance (2013)

Christian‐Oliver Ewald Johannes Geißler

We consider a continuous‐time framework featuring a central bank, private agents, and a financial market. The central bank's objective is to maximize a functional, which measures the classical trade‐off between output and inflation over time plus income from the sales of inflation‐indexed bonds minus payments for the liabilities that the inflation‐indexed bonds produce at maturity. Private agents are assumed to have adaptive expectations. The financial market is modeled in continuous‐time Black–Scholes–Merton style and financial agents are averse against inflation risk, attaching an inflation risk premium to nominal bonds. Following this route, we explain demand for inflation‐indexed securities on the financial market from a no‐arbitrage assumption and derive pricing formulas for inflation‐linked bonds and calls, which lead to a supply‐demand equilibrium. Furthermore, we study the consequences that the sales of inflation‐indexed securities have on the observed inflation rate and price level. Similar to the study of Walsh, we find that the inflationary bias is significantly reduced, and hence that markets for inflation‐indexed bonds provide a mechanism to reduce inflationary bias and increase central bank's credibility.

10.1111/mafi.12039

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The pricing of Total Loss Absorption Capacity bonds in a jump-diffusion model with regime-switching

Wenyang Xu Christian‐Oliver Ewald Linjia Dong Zhaojun Yang

Jump Diffusion

10.2139/ssrn.5036806

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How Markets for Inflation Linked Derivatives lead to low Inflation : A General Equilibrium Model

SSRN Electronic Journal (2010)

Christian‐Oliver Ewald Johannes Geißler

We consider a framework featuring a central bank, private and financial agents as well as a financial market. The central bank’s objective is to maximize a functional, which measures the classical trade-off between output and inflation plus income from the sales of inflation linked calls minus payments for the liabilities that the inflation linked calls produce at maturity. Private agents have rational expectations and financial agents are averse against inflation risk. Following this route, we explain demand for inflation linked calls on the financial market from a no-arbitrage assumption and derive pricing formulas for inflation linked calls, which lead to a supply-demand equilibrium. We then study the consequences that the sales of inflation linked calls have on the observed inflation rate and price level. Similar as in Walsh (1995) we find that the inflationary bias is significantly reduced, and hence that markets for inflation linked calls provide provide a mechanism to implement inflation contracts as discussed in the classical literature.

Lead (geology)

10.2139/ssrn.1633894

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Trading Time Seasonality in Commodity Futures: An Opportunity for Arbitrage in the Natural Gas and Crude Oil Markets?

SSRN Electronic Journal (2021)

Christian‐Oliver Ewald Erik Haugom Gudbrand Lien Ståle Størdal Yuexiang Wu

For fixed maturity, under the no-arbitrage assumption, futures prices should follow a martingale with respect to the trading time, at least under the pricing measure. Therefore, a prominent display of trading time seasonality under the physical measure raises warning signs and can only occur by means of strong seasonality in the pricing kernel. We show that for natural gas and crude oil, trading time seasonality is present to an extent where it may violate the no-arbitrage assumption. We provide three layers of evidence. The first layer is descriptive only, the second involves the Kruskal--Wicksell test for establishing trading time seasonality, and the third is in the form of a trading strategy, which exploits trading date seasonality. This strategy can produce statistically significant positive alphas in the CAPM context, thereby indicating the possibility of an arbitrage.

Seasonality

10.2139/ssrn.3792028

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Utility based pricing and exercising of real options under geometric mean reversion and risk aversion toward idiosyncratic risk

Mathematical Methods of Operations Research (2007)

Christian‐Oliver Ewald Zhaojun Yang

Mean reversion

Risk Aversion

Incomplete markets

Value (mathematics)

Risk neutral

Investment

10.1007/s00186-007-0190-9

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Citations (48)

On increasing risk, inequality and poverty measures: Peacocks, lyrebirds and exotic options

Journal of Economic Dynamics and Control (2015)

Christian‐Oliver Ewald Marc Yor

Stochastic dominance

Rothschild

10.1016/j.jedc.2015.07.004

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Hedging Crude Oil Derivatives in GARCH-Type Models

SSRN Electronic Journal (2014)

Tak Kuen Siu Roy Nawar Christian‐Oliver Ewald

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On the impact of feeding cost risk in aquaculture valuation and decision making

Quantitative Finance (2024)

Christian‐Oliver Ewald Kevin Kamm

We study the effect of stochastic feeding costs on animal-based commodities with particular focus on aquaculture. More specifically, we use soybean futures to infer on the stochastic behavior of salmon feed, which we assume to follow a Schwartz 2-factor model. We compare the decision of harvesting salmon using a decision rule assuming either deterministic or stochastic feeding costs. We identify cases, where accounting for stochastic feeding costs leads to significant improvements as well as cases where deterministic feeding costs are a good enough proxy. Nevertheless, in all of the cases, the newly derived rules show superior performance, while the additional computational costs are negligible. In conclusion, we recommend to use decision rules taking stochastic feeding costs into account.

Proxy (statistics)

Stochastic modelling

10.1080/14697688.2024.2308069

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Citations (1)