Related papers: Trends and Risk Premia: Update and Additional Plot…

The paper has 2 main goals: 1. We propose a variant of the CAPM based on coherent risk. 2. In addition to the real-world measure and the risk-neutral measure, we propose the third one: the extreme measure. The introduction of this measure…

This paper empirically analyzes how individual characteristics are associated with risk aversion, loss aversion, time discounting, and present bias. To this end, we conduct a large-scale demographically representative survey across eight…

The equity risk premium puzzle is that the return on equities has far exceeded the average return on short-term risk-free debt and cannot be explained by conventional representative-agent consumption based equilibrium models. We review a…

Network theory proved recently to be useful in the quantification of many properties of financial systems. The analysis of the structure of investment portfolios is a major application since their eventual correlation and overlap impact the…

This paper studies the income fluctuation problem with capital income risk (i.e., dispersion in the rate of return to wealth). Wealth returns and labor earnings are allowed to be serially correlated and mutually dependent. Rewards can be…

In this study, we will discuss recent developments in risk management of the global financial and insurance business with respect to sustainable development. So far climate change aspects have been the dominant aspect in managing…

In recent years, multi-factor strategies have gained increasing popularity in the financial industry, as they allow investors to have a better understanding of the risk drivers underlying their portfolios. Moreover, such strategies promise…

Fixed income has received far less attention than equity portfolio optimisation since Markowitz' original work of 1952, partly as a result of the need to model rates and credit risk. We argue that the shape of the efficient frontier is…

In the paper a problem of risk measures on a discrete-time market model with transaction costs is studied. Strategy effectiveness and shortfall risk is introduced. This paper is a generalization of quantile hedging presented in [4].

In this paper, we consider a generic interest rate market in the presence of roll-over risk, which generates spreads in spot/forward term rates. We do not require classical absence of arbitrage and rely instead on a minimal market viability…

We investigate the performance of dynamic portfolios constructed using more than 21,000 technical trading rules on 12 categorical and country-specific markets over the 2004-2015 study period, on rolling forward structures of different…

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…

We empirically analyze the reversion of financial market trends with time horizons ranging from minutes to decades. The analysis covers equities, interest rates, currencies and commodities and combines 14 years of futures tick data, 30…

A foundational approach is developed for a mathematical theory of managerial disclosure in relation to asset pricing; this involves both the earnings guidance disclosed by firm management and market `trackers' pricing the firm's exposure to…

This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…

Dual risk models are popular for modeling a venture capital or high tech company, for which the running cost is deterministic and the profits arrive stochastically over time. Most of the existing literature on dual risk models concentrated…

As demonstrated during the recent financial crisis, regulators require additional analytical tools to assess systemic risk in the financial sector. This paper describes one such tool; namely a novel market modeling and analysis capability.…

While the Kelly portfolio has many desirable properties, including optimal long-term growth rate, the resulting investment strategy is rather aggressive. In this paper, we suggest a unified approach to the risk assessment of the Kelly…

Aggregating risks from multiple sources can be complex and demanding, and decision makers usually adopt heuristics to simplify the evaluation process. This paper axiomatizes two closed related and yet different heuristics, narrow bracketing…

This paper proposes a new measure of tail risk spillover. The empirical application provides evidence of significant volatility and tail risk spillovers from the financial sector to many real economy sectors in the U.S. economy in the…