Related papers: La prime de risque dans un cadre international : l…
Several phenomena are available representing market activity: volumes, number of trades, durations between trades or quotes, volatility - however measured - all share the feature to be represented as positive valued time series. When…
Is the elasticity of intertemporal substitution (EIS) more or less than one? This question can be answered by confronting theoretical results of asset pricing models with investor behaviour during episodes of stock market panic. If we…
An asset pricing model using long-run capital share growth risk has recently been found to successfully explain U.S. stock returns. Our paper adopts a recursive preference utility framework to derive an heterogeneous asset pricing model…
We use a continuous version of the standard deviation premium principle for pricing in incomplete equity markets by assuming that the investor issuing an unhedgeable derivative security requires compensation for this risk in the form of a…
The introduction of CCPs in most derivative transactions will dramatically change the landscape of derivatives pricing, hedging and risk management, and, according to the TABB group, will lead to an overall liquidity impact about 2 USD…
This paper analizes the optimal level of transfer pricing manipulation when the expected tax penalty is a function of the tax enforcement and the market price parameter. The arm's length principle implies the existence of a range of…
It is well established that in a market with inclusion of a risk-free asset the single-period mean-variance efficient frontier is a straight line tangent to the risky region, a fact that is the very foundation of the classical CAPM. In this…
In inference problems involving a multi-dimensional parameter $\theta$, it is often natural to consider decision rules that have a risk which is invariant under some group $G$ of permutations of $\theta$. We show that this implies that the…
Markov switching models are often used to analyze financial returns because of their ability to capture frequently observed stylized facts. In this paper we consider a multivariate Student-t version of the model as a viable alternative to…
In this paper, we investigate risk minimization problem of derivatives based on non-tradable underlyings by means of dynamic g-expectations which are slight different from conditional g-expectations. In this framework, inspired by [1] and…
We introduce a new system of stochastic differential equations which models dependence of market beta and unsystematic risk upon size, measured by market capitalization. We fit our model using size deciles data from Kenneth French's data…
The concept of conditional expectation is important in applications of probability and statistics in many areas such as reliability engineering, economy, finance, and actuarial sciences due to its property of being the best predictor of a…
Time reversal invariance can be summarized as follows: no difference can be measured if a sequence of events is run forward or backward in time. Because price time series are dominated by a randomness that hides possible structures and…
This paper introduces a novel quantile approach to harness the high-frequency information and improve the daily conditional quantile estimation. Specifically, we model the conditional standard deviation as a realized GARCH model and employ…
In this paper we test computationally the performance of CAPM in an evolutionary setting. In particular we study the stability of wealth distribution in a financial market where some traders invest as prescribed by CAPM and others behave…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
In this paper we study the pricing of exchange options when underlying assets have stochastic volatility and stochastic correlation. An approximation using a closed-form approximation based on a Taylor expansion of the conditional price is…
We investigate to which extent the relevant features of (static) Systemic Risk Measures can be extended to a conditional setting. After providing a general dual representation result, we analyze in greater detail Conditional Shortfall…
The quanto option is a cross-currency derivative in which the pay-off is given in foreign currency and then converted to domestic currency, through a constant exchange rate, used for the conversion and determined at contract inception.…
Marginal expected shortfall is unquestionably one of the most popular systemic risk measures. Studying its extreme behaviour is particularly relevant for risk protection against severe global financial market downturns. In this context,…