Title: Three small epiphanies
Abstract: We discuss, on a principle rather than a technical ground, three instancies where things are perhaps not the way you thought they were - with potential impact, theoretically or practically. a) In life-cycle portfolio choice, does one really need to take realized capital gains into account, or are age-based investment rules doing the job? b) In time-consistent mean-variance portfolio optimization, is normalization of the variance by current wealth really the 'right' thing to do, or is there a 'better' normalization? c) In multi-state models frequently used in life insurance and credit risk, does there exist such a thing as a set of forward transition rates?