CentER

Rob van den Goorbergh

Abstract:
This dissertation encompasses four essays on various topics within the field of finance. Chapter 1 presents an overview of the contributions of each essay. Chapter 2, titled Risk Aversion, Price Uncertainty, and Irreversible Investments, extends the theory of irreversible investment under uncertainty by allowing for risk averse instead of risk neutral investors in an incomplete markets setting. Chapter 3, titled Economic Hedging Portfolios, studies portfolios that investors hold to hedge economic risks. Using a model of state-dependent utility, it provides a generalization of the traditional mean-variance model. In Chapter 4, titled Multivariate Option Pricing Using Dynamic Copula Models, the price behavior of derivatives written on multiple underlying assets is examined. The association between the underlying assets is modeled using parametric families of copulas which offer various alternatives to the commonly assumed normal dependence structure. Chapter 5, titled An Anatomy of Futures Returns: Risk Premiums and Trading Strategies, provides an empirical analysis of trading strategies which capture the various risk premiums that have been distinguished in futures markets. Sorting strategies designed to exploit the information in the term structure of futures yields and past hedging pressure are found to yield expected returns that cannot be explained by equity, bond, and currency benchmarks.