Related papers: La prime de risque dans un cadre international : l…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
Recent studies document strong empirical support for multifactor models that aim to explain the cross-sectional variation in corporate bond expected excess returns. We revisit these findings and provide evidence that common factor pricing…
One the one hand, rough volatility has been shown to provide a consistent framework to capture the properties of stock price dynamics both under the historical measure and for pricing purposes. On the other hand, market price of volatility…
We study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential…
An expanding literature articulates the view that Taylor rules are helpful in predicting exchange rates. In a changing world however, Taylor rule parameters may be subject to structural instabilities, for example during the Global Financial…
The study efforts to explore and extend the crisis predictability by synthetically reviewing and comparing a full mixture of early warning models into two constitutions: crisis identifications and predictive models. Given empirical results…
We tackle the problem of estimating risk measures of the infinite-horizon discounted cost within a Markov cost process. The risk measures we study include variance, Value-at-Risk (VaR), and Conditional Value-at-Risk (CVaR). First, we show…
The paper concerns primal and dual representations as well as time consistency of set-valued dynamic risk measures. Set-valued risk measures appear naturally when markets with transaction costs are considered and capital requirements can be…
We first show that there are in fact triangular arbitrage opportunities in the spot foreign exchange markets, analyzing the time dependence of the yen-dollar rate, the dollar-euro rate and the yen-euro rate. Next, we propose a model of…
Copulas. We study the model risk of multivariate risk models in a comprehensive empirical study on Copula-GARCH models used for forecasting Value-at-Risk and Expected Shortfall. To determine whether model risk inherent in the forecasting of…
We analyze an operational policy for a multinational manufacturer to hedge against exchange rate uncertainties and competition. We consider a single product and single period. Because of long-lead times, the capacity investment must done…
We axiomatically introduce risk-consistent conditional systemic risk measures defined on multidimensional risks. This class consists of those conditional systemic risk measures which can be decomposed into a state-wise conditional…
The risk premium is one of main concepts in mathematical finance. It is a measure of the trade-offs investors make between return and risk and is defined by the excess return relative to the risk-free interest rate that is earned from an…
A plethora of static and dynamic models exist to forecast Value-at-Risk and other quantile-related metrics used in financial risk management. Industry practice tends to favour simpler, static models such as historical simulation or its…
It is shown that prize changes of the US dollar - German Mark exchange rates upon different delay times can be regarded as a stochastic Marcovian process. Furthermore we show that from the empirical data the Kramers-Moyal coefficients can…
This project attempts to address the problem of asset pricing in a financial market, where the interest rates and volatilities exhibit regime switching. This is an extension of the Black-Scholes model. Studies of Markov-modulated regime…
We present a general approach to the pricing of products in finance and insurance in the multi-period setting. It is a combination of the utility indifference pricing and optimal intertemporal risk allocation. We give a characterization of…
Quanto options allow the buyer to exchange the foreign currency payoff into the domestic currency at a fixed exchange rate. We investigate quanto options with multiple underlying assets valued in different foreign currencies each with a…
The Capital Asset Pricing Model (CAPM) is one of the original models in explaining risk-return relationship in the financial market. However, when applying the CAPM into reality, it demonstrates a lot of shortcomings. While improving the…
We develop an arbitrage-free random field LIBOR market model to price cross-currency derivatives. The uncertainty of the forward LIBOR rates of our cross-currency model is driven by a two time parameter random field instead of a finite…