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The Semimartingale Equilibrium Risk Premium for a Risk Seeking Investor

Author

Listed:
  • George M. Mukupa
  • Elias R. Offen

Abstract

In this paper, we consider jump amplitudes which are arbitrary and normal to study the risk seeking investor's equilibrium risk premium in the semimartingale market. We realize that, there is no optimal consumption for this investor in the market. The investor's premium differ significantly with risk aversion in both martingale and semimartingale markets in that the risk seeking investor has no optimal consumption and the wealth process only affects the rare-event premia with no effect on the diffusive premia. The compensation for this investor is highly attractive compared to risk aversion in this market.

Suggested Citation

  • George M. Mukupa & Elias R. Offen, 2020. "The Semimartingale Equilibrium Risk Premium for a Risk Seeking Investor," Journal of Mathematics Research, Canadian Center of Science and Education, vol. 12(4), pages 1-13, August.
    • Handle: RePEc:ibn:jmrjnl:v:12:y:2020:i:4:p:13
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    References listed on IDEAS

    as
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    3. George M. Mukupa & Elias R. Offen, 2018. "The semi-martingale equilibrium equity premium for risk-neutral investors," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 5(04), pages 1-15, December.
    4. Bates, David S., 2008. "The market for crash risk," Journal of Economic Dynamics and Control, Elsevier, vol. 32(7), pages 2291-2321, July.
    5. Vicky Henderson & David Hobson, 2002. "Coupling and Option Price Comparisons in a Jump-Diffusion model," OFRC Working Papers Series 2002mf01, Oxford Financial Research Centre.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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