Related papers: Natural Asset Beta
The ratio of males to females in a population is a meaningful characteristic of sexual species. The reason for this biological property to be available to the observers of nature seems to be a question never asked. Introducing the notion of…
Asset correlations are an intuitive and therefore popular way to incorporate event dependence into event risk, e.g., default risk, modeling. In this paper we study the case of estimation of inter-sector asset correlations by separation of…
The possibility of exploiting multiple resources is usually regarded as positive from both the economic and the environmental point of view. However, resource switching may also lead to unsustainable growth and, ultimately, to an…
Biological populations are subject to fluctuating environmental conditions. Different adaptive strategies can allow them to cope with these fluctuations: specialization to one particular environmental condition, adoption of a generalist…
Renewable resources are starting to constitute a growing portion of the total generation mix of the power system. A key difference between renewables and traditional generators is that many renewable resources are managed by individuals,…
We consider the consumption-based asset pricing model, derive a new modified basic pricing equation, and present its successive approximations using the Taylor series expansions of the investor's utility during the averaging time interval.…
In the standard equilibrium and/or arbitrage pricing framework, the value of any asset is uniquely specified from the belief that only the systematic risks need to be remunerated by the market. Here, we show that, even for arbitrary large…
Managing a portfolio to a risk model can tilt the portfolio toward weaknesses of the model. As a result, the optimized portfolio acquires downside exposure to uncertainty in the model itself, what we call "second order risk." We propose a…
Much of today's sustainability discourse emphasizes efficiency, clean technologies, and smart systems, but largely underestimates fundamental physical constraints relating to energy-matter interactions. These constraints stem from the fact…
We give an explicit formulaic algorithm and source code for building long-only benchmark portfolios and then using these benchmarks in long-only market outperformance strategies. The benchmarks (or the corresponding betas) do not involve…
A simple statement and accessible proof of a version of the Fundamental Theorem of Asset Pricing in discrete time is provided. Careful distinction is made between prices and cash flows in order to provide uniform treatment of all…
This paper presents an empirical analysis of the capital asset pricing model using trading data for the Chinese A-share market from 2000 to 2019. Firstly, the standard CAPM is tested using a Fama-MacBetch regression and although the results…
In this paper we develop a novel methodology for estimation of risk capital allocation. The methodology is rooted in the theory of risk measures. We work within a general, but tractable class of law-invariant coherent risk measures, with a…
Traditional competitive markets do not account for negative externalities; indirect costs that some participants impose on others, such as the cost of over-appropriating a common-pool resource (which diminishes future stock, and thus…
Stochastic portfolio theory aims at finding relative arbitrages, i.e. trading strategies which outperform the market with probability one. Functionally generated portfolios, which are deterministic functions of the market weights, are an…
We study market-to-book ratios of stocks in the context of Stochastic Portfolio Theory. Functionally generated portfolios that depend on auxiliary economic variables other than relative capitalizations ("sizes") are developed in two ways,…
We explore credit risk pricing by modeling equity as a call option and debt as the difference between the firm's asset value and a put option, following the structural framework of the Merton model. Our approach proceeds in two stages:…
We consider risk averse investors with different levels of anxiety about asset price drawdowns. The latter is defined as the distance of the current price away from its best performance since inception. These drawdowns can increase either…
Essential to each other, growth and exploration are jointly observed in populations, be it alive such as animals and cells or inanimate such as goods and money. But their ability to move, crucial to cope with uncertainty and optimize…
This article provides an overview of the history of economic thought on natural resource extraction, which has long been considered an enclave industry with few benefits for areas beyond the local economy. We focus on more recent…