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This paper studies optimally defined contribution (DC) pension investment problems under the expected utility maximization framework with stochastic income and inflation risks. The member has access to a financial market consisting of a risk-free asset (money account), an inflation-indexed bond, and a stock. The market price of volatility risk is assumed to depend on an affine-form, Markovian, square-root factor process, while the return rate and the volatility of the stock are possibly given by general non-Markovian, unbounded stochastic processes. This financial framework recovers the Black–Scholes model, constant elasticity of variance (CEV) model, Heston model, 3/2 model, 4/2 model, and some non-Markovian models as exceptional cases. To tackle the potentially non-Markovian structures, we adopt a backward stochastic differential equation (BSDE) approach. By solving the associated BSDEs explicitly, closed-form expressions for the optimal investment strategies and optimal value functions are obtained for the power, logarithmic, and exponential utility functions. Moreover, explicit solutions to some special cases of our portfolio model are provided. Finally, numerical examples are provided to illustrate the effects of model parameters on the optimal investment strategies under the 4/2 model.

Using the ARFIMA (autoregressive and fractionally integrated moving aver age) model extended with sGARCH (standard generalised autoregressive con ditional heteroscedasticity) and ’gjrGARCH (Glosten-Jagannathan-Runkle gen eralised autoregressive conditional heteroscedascity) innovations, fractional in tegration approach and state space model, this study has empirically examined persistency of inflation dynamics of Ghana and South Africa, the only two coun tries in Sub-Saharan Africa with Inflation Targeting (IT) monetary policy. The first part of the analysis employed monthly CPI (Consumer Price Index) in flation series for the period January 1971 to October 2014 obtained from the Bank of Ghana (BoG), and for the period January 1995 to December 2014 ob tained from Statistics South Africa. The second part involves the estimation of threshold effect of inflation on economic growth using annual data obtained from the IMF (International Monetary Fund) database for the period 1981 to 2014, for both countries. Results from the study showed that structural breaks, long memory and non linearities (or regime shifts) are largely responsible for inflation persistence, hence the ever-changing nature of inflation rates of Ghana and South Africa. ARFIMA(3,0.35,1)-‘gjrGARCH(1,1) under Generalised Error Distribution (GED) and ARFIMA(3,0.50,1)-‘gjrGARCH(1,1) under Student-t Distribution (STD) mod els provided the best fit for persistence in the conditional mean (or level) of CPI for Ghana and South Africa, respectively. The results from these models pro vided evidence of time-varying conditional mean and volatility in CPI inflation rates of both countries. The two models also revealed an asymmetric effect of inflationary shocks, where negative shocks appear to have greater impact than positive shocks, in terms of persistence on the conditional mean with time varying volatility. This thesis proposes a model that combines fractional integration with non linear deterministic terms based, National Research Foundation (NRF), Department of Science and Technology (DST), Telkom’s Tertiary Education Support Programme (TESP) and the NRF-DST Centre of Excellence for Mathematical and Statistical Sciences (CoE-MaSS)

Banks in Nigeria experienced dwindling in financial performance as well as financial crisis within the period of the study. Therefore, this study examined the impact of systematic risk on financial performance of listed deposit money banks in Nigeria. Using a sample size of 13 banks for the period of 2007 – 2019, the effect of foreign exchange risk, inflation risk and financial crisis risk on financial performance proxy by return on equity was investigated. Secondary data is collected from the financial statements of the selected banks which was analysed using panel regression. The result of the analysis reveals that foreign exchange risk has positive insignificant relationship with financial performance of banks, inflation risk has positive significant relationship with banks financial performance and financial crisis risk has negative significant relationship on financial performance of Nigerian banks. The study therefore recommends that listed banks in Nigeria should be more cautious in their business operations during inflationary and financial crisis periods. They should also reduce their engagement in foreign exchange business.

Banks in Nigeria experienced dwindling in financial performance as well as financial crisis within the period of the study. Therefore, this study examined the impact of systematic risk on financial performance of listed deposit money banks in Nigeria. Using a sample size of 13 banks for the period of 2007 – 2019, the effect of foreign exchange risk, inflation risk and financial crisis risk on financial performance proxy by return on equity was investigated. Secondary data is collected from the financial statements of the selected banks which was analysed using panel regression. The result of the analysis reveals that foreign exchange risk has positive insignificant relationship with financial performance of banks, inflation risk has positive significant relationship with banks financial performance and financial crisis risk has negative significant relationship on financial performance of Nigerian banks. The study therefore recommends that listed banks in Nigeria should be more cautious in their business operations during inflationary and financial crisis periods. They should also reduce their engagement in foreign exchange business.

This paper provides a joint quantitative analysis of capital structure decisions (debt versus equity) and debt structure decisions (fixed-rate debt versus floating-rate debt or inflation-linked debt) in a continuous-time setting. We show that optimizing the debt structure has an impact on capital structure decisions, and leads to increases in leverage ratios compared to a pure fixed-rate debt program. We also find that for realistic parameter values, jointly optimizing the debt and capital structures generates a significant increase in firm value with respect to a situation where only the capital structure is optimized.

Real Estate Investment Trusts (REITs) represent a viable alternative to direct property investments. They offer enhanced liquidity and risk diversification. In addition, the securitisation process provides a level of governance not typically offered in direct property markets. However, as an openly traded security, it experiences risk exposures inherent to equities such as interest rate risk, default risk, inflation and so on. This study explores the nature and magnitude of various macroeconomic risk factors that drive REIT performance. Utilising data from the Australian market over a 20 year period spanning multiple economic cycles, REITs were found to have an adverse relationship to unexpected inflation and default risk suggesting that REITs are not an effective hedge against inflation. On the other hand, increasing spreads in the yield curve and changes to expected inflation and were found to correlate positively with fund performance. The latter effect possibly being due to higher expected rents. These effects are greater for highly leveraged funds and those that adopt a stapled trust structure. This is expected given their greater reliance on debt and the wider set of operating activities which compound exposures to market and financial risk. These funds also exhibited a greater overall exposure to market risk. Size risk was also considered with small cap funds exhibiting greater exposure to the risk factors than medium and large funds. The practical implications for asset allocation strategies is that portfolio managers and other investors seeking to take a long position may select highly leveraged funds with a stapled trust structure operating in a low interest environmental with higher expected inflation; whole those wishing to adopt a more defensive stance may consider less heavily geared funds with external management.

Real Estate Investment Trusts (REITs) represent a viable alternative to direct property investments. They offer enhanced liquidity and risk diversification. In addition, the securitisation process provides a level of governance not typically offered in direct property markets. However, as an openly traded security, it experiences risk exposures inherent to equities such as interest rate risk, default risk, inflation and so on. This study explores the nature and magnitude of various macroeconomic risk factors that drive REIT performance. Utilising data from the Australian market over a 20 year period spanning multiple economic cycles, REITs were found to have an adverse relationship to unexpected inflation and default risk suggesting that REITs are not an effective hedge against inflation. On the other hand, increasing spreads in the yield curve and changes to expected inflation and were found to correlate positively with fund performance. The latter effect possibly being due to higher expected rents. These effects are greater for highly leveraged funds and those that adopt a stapled trust structure. This is expected given their greater reliance on debt and the wider set of operating activities which compound exposures to market and financial risk. These funds also exhibited a greater overall exposure to market risk. Size risk was also considered with small cap funds exhibiting greater exposure to the risk factors than medium and large funds. The practical implications for asset allocation strategies is that portfolio managers and other investors seeking to take a long position may select highly leveraged funds with a stapled trust structure operating in a low interest environmental with higher expected inflation; whole those wishing to adopt a more defensive stance may consider less heavily geared funds with external management.

Although the market for inflation-linked bonds has expanded enormously, nominal bonds are still the main instrument to finance public debts. This paper seeks to explain why. It focuses on the Eurozone countries for which the standard argument that inflation-linked bonds may help to reduce inflation expectations, is less relevant. The paper demonstrates that inflation-linked bonds suffer from a lack of liquidity. Further, governments may find the use of inflation-linked bonds less attractive as these bonds amplify the volatility of the public deficit ratio. Two pieces of empirical evidence support our argument.

Risk measurement as applicable for insurers (Solvency 2) or banks (Basel 2)can also be consid- ered for pension fund liabilities. The purpose of this paper is to present various stochastic models in continuous time in order to estimate solvency capital for two important risks faced by pension funds: market risk and in ation risk. We address the situation of a Defined Benefit Pension Scheme (DB) with liabilities linked to final salary. We try to develop in this context a methodology co- herent with IAS norms based on the so called projected unit credit cost method but including a risk measure approach. We also show that pension portability could be modelled using classical ruin theory. The models are developed first in a geometric Brownian motion environment and afterwards, using a Lévy process for the asset.

Inflation expectation is an important indicator for policy makers and financial investors. To capture a more accurate real-time estimate of inflation expectation on the basis of financial markets, we propose an arbitrage-free term structure model across different countries. We first estimate inflation expectation by modeling the nominal and the inflation-indexed bond yields jointly for each country. The joint dynamic model for inflation expectation is a cross sectional state space model combined with a GeoCopula model, which accounts for the default risk and the non Gaussian dependency structure over countries. We discover that the extracted common trend for inflation expectation is an important driver for each country of interest. Moreover, the model extracts informative estimates of inflation expectations and will provide good implications for monetary policies.

Inflation expectation is an important indicator for policy makers and financial investors. To capture a more accurate real-time estimate of inflation expectation on the basis of financial markets, we propose an arbitrage-free term structure model across different countries. We first estimate inflation expectation by modeling the nominal and the inflation-indexed bond yields jointly for each country. The joint dynamic model for inflation expectation is a cross sectional state space model combined with a GeoCopula model, which accounts for the default risk and the non Gaussian dependency structure over countries. We discover that the extracted common trend for inflation expectation is an important driver for each country of interest. Moreover, the model extracts informative estimates of inflation expectations and will provide good implications for monetary policies.

Inflation expectation is an important indicator for policy makers and financial investors. To capture a more accurate real-time estimate of inflation expectation on the basis of financial markets, we propose an arbitrage-free term structure model across different countries. We first estimate inflation expectation by modeling the nominal and the inflation-indexed bond yields jointly for each country. The joint dynamic model for inflation expectation is a cross sectional state space model combined with a GeoCopula model, which accounts for the default risk and the non Gaussian dependency structure over countries. We discover that the extracted common trend for inflation expectation is an important driver for each country of interest. Moreover, the model extracts informative estimates of inflation expectations and will provide good implications for monetary policies.

Defined Benefit Pension Schemes (DB) are affected by a lot of different risks able to put in danger the viability of the system. A solvency analysis seems therefore to be essential as in insurance but it must take into account the specicities of pension liabilities. In particular, pension funds are characterized by a long term aspect and a limited need of liquidity. In this perspective, the purpose of this paper is to combine the three major risks affecting a DB plan (market, inflation and longevity risks) and to look at their effect on the solvency of the pension fund.

Project finance investments are a key backbone for a wide range of sustainable and bankable new infrastructures; being long term investments, they are highly exposed to inflation risk, which in Public Private Partnerships is mostly borne by the private counterpart and its backing lenders. Prompt monitoring and resilient contractual design ease inflation risk detection, management and mitigation, together with proper and flexible financial modelling, alleviating its potentially disrupting impact, especially if unpredictable or chronically enduring

We show that inflation risk is priced in international asset returns. We analyze inflation risk in a framework that encompasses the International Capital Asset Pricing Model (ICAPM) of Adler and Dumas (1983). In contrast to the extant empirical literature on the ICAPM, we relax the assumption that inflation rates are constant. We estimate and test a conditional version of the model for the G5 countries (France, Germany, Japan, the U.K., and the U.S.) over the period 1975-1998 and find evidence of statistically and economically significant prices of inflation risk (in addition to priced nominal exchange rate risk). Our results imply a rejection of the restrictions imposed by the ICAPM. In an extension of our analysis to 2003, we show that even after the termination of nominal exchange rate fluctuations in the euro area in 1999, differences in inflation rates across countries entail non-trivial real exchange rate risk premia.

This paper aims at studying the asset allocation problem of a non-life insurance company when inflation risk and interest rate risk are taken into account. To this purpose, we apply the risk-minimization theory developed by Follmer Sondermann (1986) and extended by Mller (2001). We derive the general form of the risk-minimizing strategies when the cumulative payments of the insurer are described, as suggested by Arjas (1989), by a process adapted to the natural filtration of a marked point process and when the inflation and the term structure of interest rates are simultaneously described by the HJM model of Jarrow Yildirim (2003). We then apply our general results in two collective models and two individual models of non-life insurance payments.

This paper develops a model of the costliness of inflation that places the locus of costs in the bond market, rather than the money market. It argues that inflation is costly on account on the contraction of the bond market caused by the riskiness of inflation. The theory is premised upon the social function of bond markets as consisting of the transference of technological risk from those economic interests where risk is most concentrated (and so most painful) to interests where it is less concentrated (and so less painful). Using a Ramsey-Solow model with decision-makers maximising expected utility from consumption and real balances, the paper argues that unpredictable inflation impedes this useful transfer in risks secured by the bond market. Unpredictable inflation makes debt most costly when income is the most needed by debtors (since when the ex post real interest is highest, the debtor is in consequence the poorest), and credit the most remunerative when income is the least needed by creditors (since when the ex post real interest is the highest, the creditor is as a consequence richest). The upshot of these disincentives to borrow and lend is that less risk is transferred. Thus unpredictable inflation reduces the socially beneficial transfer of risks that a bond market secures.

The paper advances an answer to a puzzle: Why is any lending or borrowing done in terms of money, when such money debt exposes the lenders’ wealth to inflation risk? The ‘received’ answer to this question is that money bonds are just proxies for real bonds, proxies born of insufficient appreciation, or a benign neglect, of inflation risk. As mere ‘proxies’, this answer implies that money bonds are redundant: anything a money bond could do, a real bond could do. The thesis of the paper is that money bonds are not redundant. Money bonds have a social benefit. That benefit lies in the reduction that money bonds secure in the unpredictability of consumption that arises from the operation of real balance effects in an environment of unpredictable money shocks. It is the very vulnerability of money bonds to inflation makes them useful in immunising the economy against unpredictable redistributions of purchasing power caused by real balance effects.

This paper develops a model of the costliness of inflation that places the locus of costs in the bond market, rather than the money market. It argues that inflation is costly on account on the contraction of the bond market caused by the riskiness of inflation. The theory is premised upon the social function of bond markets as consisting of the transference of technological risk from those economic interests where risk is most concentrated (and so most painful) to interests where it is less concentrated (and so less painful). Using a Ramsey-Solow model with decision-makers maximising expected utility from consumption and real balances, the paper argues that unpredictable inflation impedes this useful transfer in risks secured by the bond market. Unpredictable inflation makes debt most costly when income is the most needed by debtors (since when the ex post real interest is highest, the debtor is in consequence the poorest), and credit the most remunerative when income is the least needed by creditors (since when the ex post real interest is the highest, the creditor is as a consequence richest). The upshot of these disincentives to borrow and lend is that less risk is transferred. Thus unpredictable inflation reduces the socially beneficial transfer of risks that a bond market secures.

The paper advances an answer to a puzzle: Why is any lending or borrowing done in terms of money, when such money debt exposes the lenders’ wealth to inflation risk? The ‘received’ answer to this question is that money bonds are just proxies for real bonds, proxies born of insufficient appreciation, or a benign neglect, of inflation risk. As mere ‘proxies’, this answer implies that money bonds are redundant: anything a money bond could do, a real bond could do. The thesis of the paper is that money bonds are not redundant. Money bonds have a social benefit. That benefit lies in the reduction that money bonds secure in the unpredictability of consumption that arises from the operation of real balance effects in an environment of unpredictable money shocks. It is the very vulnerability of money bonds to inflation makes them useful in immunising the economy against unpredictable redistributions of purchasing power caused by real balance effects.

European capital markets have changed dramatically over the last couple of years. Due to the harmonization of monetary and policy rules and the elimination of exchange rate risk (through the introduction of the euro) countries in the European Monetary Union (EMU) are becoming more integrated. In this thesis the author tries to determine the consequences of this integration process for asset pricing in the euro area. The most important conclusion, which is a central theme of the thesis, is that the characteristics of financial markets in the euro area have been changing. In other words, investors and researchers cannot base their expectations on the (long) historical evidence of these markets, because the structural changes have a clear impact on the characteristics of the markets. For example, the author shows that industry information has become more valuable in terms of portfolio diversification benefits than country information, especially after the introduction of the euro, which contrasts with the literature of the 90’s. Therefore, investors should change their view in the euro area to a sector-based approach. Most institutional investors, which are the biggest investors in the euro area, have already changed their view into a sector-based approach. As a consequence, euro area portfolio managers are nowadays tracking sector indices instead of country indices. One of the chapters in part II of the thesis shows the implications of that change for the banking sector. Stock returns of big banks have become more correlated, while this is not the case for smaller banks. The author argues that this is not a result of a similar performance or product portfolio of these banks, but is likely the result of the change in perspective of most euro area investors. Next to these topics, the thesis also covers different asset pricing models (Fama and French three factor models for the euro area and an international asset pricing model that provides evidence of a significant ris, Gerard Moerman (1976) received his Master’s degree in Econometrics from the Erasmus University Rotterdam in 1999. In October 1999 he joined ERIM to carry out his doctoral research at the Financial Management department of the RSM Erasmus University. During this time he spent seven months at the European Central Bank (Frankfurt) as an economist at the General Economic Research Department. Some of his work has been published (Journal of International Money and Finance) and presented at international conferences. His current research interests include empirical asset pricing, banking and financial integration. Also, he has reviewed several papers, e.g. for the Journal of International Money and Finance and the ECB working paper series. As of February 2005 he joined AEGON Asset Management as Investment Strategist., In dit proefschrift staan de aandelenmarkten uit het eurogebied centraal. De belangrijkste conclusie, die als rode draad door het proefschrift loopt, is dat het Europese integratieproces een aantoonbare invloed heeft op de Europese aandelenmarkten. Deze these wordt vanuit verschillende perspectieven onderzocht. Nieuwe modellen voor de waardering van aandelen Een direct gevolg van deze algemene conclusie is dat modellen die gebruikt worden om de prijs van een aandeel te bepalen opnieuw bestudeerd moeten worden. Deze worden namelijk meestal getest op basis van een lange reeks van historische gegevens. Het is echter niet verstandig de verwachtingen te baseren op de historische gegevens alleen, omdat “de spelregels” in en tussen de aandelenmarkten uit het eurogebied veranderd zijn. Bijvoorbeeld, de introductie van de euro heeft als direct gevolg dat het wisselkoersrisico tussen eurolanden is verdwenen. Moerman test één van de meest gebruikte modellen voor het prijzen van aandelen (gebaseerd op het onderzoek van Fama en French) en laat zien dat het Europese model steeds meer terrein wint ten opzichte van een apart model voor ieder land. Hieruit kan geconcludeerd worden dat aandelenmarkten meer financiële integratie laten zien. Betere risicospreiding over sectoren dan over landen Veel pensioenfondsen en andere vermogensbeheerders proberen hun aandelenportefeuille zo slim mogelijk op te zetten door de beleggingen te spreiden, waardoor de verhouding tussen het rendement en het risico beter is. Onderzoek uit de jaren negentig toonde aan dat een spreiding over verschillende landen het meest succesvol was. Moerman laat echter zien dat deze resultaten heden ten dage niet meer opgaan voor het eurogebied. Door het integratieproces laten de aandelenindices van landen steeds meer dezelfde beweging zien, waardoor het spreiden minder diversificatievoordelen oplevert. Spreiding over verschillende sectoren is verstandiger. Gevolgen van deze andere aanpak Uit een rapport van de Europese

This paper analyses default risk of wage-indexed payment mortgage (WIPM) in Turkey in comparison with other standard mortgage contracts originated in high inflationary economies. Emlak Bank launched WIPM linked to Civil Service employees’ wage (CSW) index during high inflationary period of late 1990s. Concurrently, the government introduced a policy linking CSW index to semi-annual expected rate of inflation in an attempt to facilitate housing finance for the fastest growing sector of the population. We find that WIPM protects borrowers against risk of high payment shocks whereas nominal contracts such as ARM and DIM would have resulted in high mortgage defaults.

In this work we contribute to the literature about the optimal asset allocation in continuous-time. In particular, we consider the problem of maximising the expected utility of the investor's final wealth over a finite time horizon. We develop a suitable framework in the dynamic stochastic optimal control theory in order to analyse the optimal asset allocation problem for an institutional investor like a bank, an insurance company, an investment fund, or a pension fund. Such an investor cannot control the contributions to and withdrawals from the managed wealth. In fact, while the classical consumption-portfolio problem considers consumption as a control variable, in our analysis the flows of wealth that are different from the coupons and dividends, are just state variables. We refer to them as "background variables". Furthermore, the analysis explicitly takes into account the inflation risk that is generally neglected by the asset allocation literature. In such a context we present some quasi-explicit solutions for the optimal asset allocation problem without specifying any particular functional form for the drift and diffusion terms of the stochastic differential equations describing the financial market, the background variables, and inflation. The institutional investor's attitude towards risk is supposed to be described by an increasing and concave utility function whose risk aversion is absolutely constant, relatively constant, or hyperbolic according to the problem setting that must be solved. Finally, we explicitly consider the case of a pension fund that must maximise the expected utility of its surplus. Unlike the analyses studying the problem of a non-actuarial institutional investor, the case of a pension fund requires the introduction of two new characteristics: (i) the different behaviour of the fund's wealth during the accumulation and the decumulation phases, and (ii) the mortality risk. We develop a set up aimed at finding out how and how much this, Dans ce travail nous donnons une contribution à la litérature de l'allocation optimale du portefeuille en temps continu. En particulier, nous analysons le problème d'un investisseur qui veut maximiser la valeur espérée de l'utilité de sa richesse, avec un horizon temporel fini. En utilisant la théorie du contrôle optimal dynamique, on developpe un modèle dédié à l'analyse de l'allocation optimal de portefeuille pour un investisseur institutionnel tel qu'une banque, une compagnie d'assurance, un fond commun d'investissement ou un fond de pension. Un tel investisseur ne peut pas contrôler les contributions et les prelèvements du fond géré. En effet, même si l'approche classique optimise soit le portefeuille soit la consommation intertemporelle en considérant les prélèvements du fond dûs à la consommation comme une variable de contrôle, dans notre approche les flux de richesse qui diffèrent des coupons et dividends, sont tout simplement des variables d'état. On appellera ces variables "variables de background". De plus, notre analyse rend compte explicitement du risque d'inflation qui est généralement négligé par la literature sur l'allocation des actifs financiers. Dans ce contexte nous présentons une solution quasi-explicite pour l'investissement optimal sans spécifier acune forme fonctionnelle ni pour les dérives, ni pour les diffusions des équations stochastiques qui décrivent le marché financier, les variables de background et l'inflation. Nous supposons que l'attitude envers le risque de l'investisseur institutionnel est décrit par une fonction d'utilité croissante et concave, dont l'aversion au risque est absolument constante, relativement constante ou hyperbolique selons la structure du problème qui doit être resolu. Finalement nous analyson explicitement le cas d'un fond de pension qui veut maximiser la valeur espérée de sons surplus. Contrairement aux modèles qui étudient un investisseur qui est institutionnel mais pas actuarial, le cas d'un fond de pension r, (ECON 3)--UCL, 2003

In this paper we take into account a very general setting with: (i)a set of stochastic investment opportunities, (ii) a set of risky assets, (iii) a riskless asset paying a stochastic interest rate, (iv) a stochastic inflation risk, (v) stochastic labor income, and (vi) HARA preferences. We compute a quasi-explicit solution for both the optimal consumption and asset allocation. This solution is based on two changes in the probability measure. We also show that the investor behaves as if he could rely on his wealth augmented by the expected value of all his ?forward real labor incomes?.

We consider a stochastic model for a defined-contribution pension fund in continuous time. In particular, we focus on the portfolio problem of a fund manager who wants to maximize the expected utility of his terminal wealth in a complete financial market with stochastic interest rate. The fund manager must cope with two background risks : the salary risk and the inflation risk. We find a closed form solution for the asset allocation problem and so we are able to analyse in detail the behaviour of the optimal portfolio with respect to salary and inflation. Finally, a numerical smulation is presented.

This paper analyses the portfolio problem of an investor maximizing the expected exponential utility of his terminal real wealth. The investor must cope with both a set of stochastic investment opportunities and a set of background risks. If the market is complete we are able to find an exact solution. If the market is incomplete, we suggest an approximated general solution. Contrary to other exact solutions obtained in the literature, all our results are obtained considering a stochastic inflation risk and without specifying any particular functional form for the stochastic variables involved in the problem. (C) 2002 Elsevier Science B.V. All rights reserved.

This paper analyses the portfolio problem of an investor who whants to maximize the expected utility of his terminal real wealth in an incomplete financial market. The investor must cope with a set of stochastic investment opportunities and inflation risk following a jump-diffusion process. We investigate how the inflation risk affects the optimal portfolio composition and, at this aim, we present an approximated analytical solution to the portfolio choice problem based on the Feynman-Kac representation theorem. Finally, we compare our approximated solution with some exact solutions available in the literature and we find that the main qualitative results are maintained.

Theodore Roosevelt answers Leslie M. Shaw's question regarding a letter from John W. Gates. Roosevelt is cautious about the risk of inflation that increasing currency at a faster rate would cause. Roosevelt does not believe the current volume of currency should increase.

Theodore Roosevelt answers Leslie M. Shaw's question regarding a letter from John W. Gates. Roosevelt is cautious about the risk of inflation that increasing currency at a faster rate would cause. Roosevelt does not believe the current volume of currency should increase.