The Financial Market of Indices of Socioeconomic Wellbeing

Thilini V. Mahanama, Abootaleb Shirvani and Svetlozar Rachev

Papers from arXiv.org

Abstract: The financial industry should be involved in mitigating the risk of downturns in the financial wellbeing indices around the world by implementing well-developed financial tools such as insurance instruments on the underlying wellbeing indices. We define a new quantitative measure of the wellbeing of a country's population for those countries using the world development indicators provided by the World Bank. We monetize the indices of socioeconomic wellbeing, which serve as "risky assets," and consequently develop a global financial market for them, which serves as a "market of indices of socioeconomic wellbeing." Then, we compare the wellbeing of different countries using financial econometric analysis and dynamic asset pricing theory. We provide the optimal portfolio weight composition along with the efficient frontiers of the wellbeing socioeconomic indices with different risk-return measures. We derive insurance instruments, such as put options, which allow the financial industry to monitor, manage, and trade these indices, creating the funds for insurance against adverse movements of those indices. Our findings should help financial institutions to incorporate socioeconomic issues as an additional dimension to their "two-dimensional" risk-return adjusted optimal financial portfolios.

Date: 2023-03
New Economics Papers: this item is included in nep-des and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2303.05654 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2303.05654

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().