Related papers: On pricing kernels, information and risk

Trading a financial asset pushes its price as well as the prices of other assets, a phenomenon known as cross-impact. We consider a general class of kernel-based cross-impact models and investigate suitable parameterisations for trading…

This paper presents an augmented deep factor model that generates latent factors for cross-sectional asset pricing. The conventional security sorting on firm characteristics for constructing long-short factor portfolio weights is nonlinear…

The general problem of asset pricing when the discount rate differs from the rate at which an asset's cash flows accrue is considered. A pricing kernel framework is used to model an economy that is segmented into distinct markets, each…

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 analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…

When investors have heterogeneous attitudes towards risk, it is reasonable to assume that each investor has a pricing kernel, and that these individual pricing kernels are aggregated to form a market pricing kernel. The various investors…

This paper presents an axiomatic scheme for interest rate models in discrete time. We take a pricing kernel approach, which builds in the arbitrage-free property and provides a link to equilibrium economics. We require that the pricing…

Numerous kinds of uncertainties may affect an economy, e.g. economic, political, and environmental ones. We model the aggregate impact by the uncertainties on an economy and its associated financial market by randomised mixtures of L\'evy…

In this paper incomplete-information models are developed for the pricing of securities in a stochastic interest rate setting. In particular we consider credit-risky assets that may include random recovery upon default. The market…

The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…

We consider the theory of bond discounts, defined as the difference between the terminal payoff of the contract and its current price. Working in the setting of finite-dimensional realizations in the HJM framework, under suitable notions of…

In this paper we extend the theory of option pricing to take into account and explain the empirical evidence for asset prices such as non-Gaussian returns, long-range dependence, volatility clustering, non-Gaussian copula dependence, as…

Modern Bayesian optimization and adaptive sampling methods increasingly rely on nonlinear parametric models, yet theoretical guarantees for such models under adaptive data collection remain limited. Existing analyses largely focus on…

In this paper, we present a data-driven ensemble approach for option price prediction whose derivation is based on the no-arbitrage theory of option pricing. Using the theoretical treatment, we derive a common representation space for…

If pricing kernels are assumed non-negative then the inverse problem of finding the pricing kernel is well-posed. The constrained least squares method provides a consistent estimate of the pricing kernel. When the data are limited, a new…

Traditional insurance pricing relies on risk-based principles that ensure actuarial fairness and solvency but do not explicitly account for policyholders' price sensitivity. We formulate insurance pricing as a decision-making problem and…

In this paper we provide a quantitative analysis to the concept of arbitrage, that allows to deal with model uncertainty without imposing the no-arbitrage condition. In markets that admit ``small arbitrage", we can still make sense of the…

At the core of insurance business lies classification between risky and non-risky insureds, actuarial fairness meaning that risky insureds should contribute more and pay a higher premium than non-risky or less-risky ones. Actuaries,…

We reverse-engineer the equilibrium construction process of asset prices in order to obtain returns which depend on firm characteristics, possibly in a linear fashion. One key requirement is that agents must have demands that rely…

We develop a nonparametric, kernel-based joint estimator for conditional mean and covariance matrices in large and unbalanced panels. The estimator is supported by rigorous consistency results and finite-sample guarantees, ensuring its…