Related papers: The Co-Pricing Factor Zoo

The value of stocks, indices and other assets, are examples of stochastic processes with unpredictable dynamics. In this paper, we discuss asymmetries in short term price movements that can not be associated with a long term positive trend.…

In this study, we introduce new estimation methods for the required rate of returns on equity and liabilities of private and public companies using the stochastic dividend discount model (DDM). To estimate the required rate of return on…

Consider an insurance company exposed to a stochastic economic environment that contains two kinds of risk. The first kind is the insurance risk caused by traditional insurance claims, and the second kind is the financial risk resulting…

Prudent management of insurance investment portfolios requires competent asset pricing of fixed-income assets with time-to-event contingent cash flows, such as consumer asset-backed securities (ABS). Current market pricing techniques for…

Classic stochastic volatility models assume volatility is unobservable. We use the Volatility Index: S&P 500 VIX to observe it, to easier fit the model. We apply it to corporate bonds. We fit autoregression for corporate rates and for risk…

Tensor time series data appears naturally in a lot of fields, including finance and economics. As a major dimension reduction tool, similar to its factor model counterpart, the idiosyncratic components of a tensor time series factor model…

Asset prices contain information about the probability distribution of future states and the stochastic discounting of those states as used by investors. To better understand the challenge in distinguishing investors' beliefs from…

This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a num\'eraire. It is shown that the presence of arbitrarily small…

Actuaries use predictive modeling techniques to assess the loss cost on a contract as a function of observable risk characteristics. State-of-the-art statistical and machine learning methods are not well equipped to handle hierarchically…

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,…

The widespread co-existence of misspecification and weak identification in asset pricing has led to an overstated performance of risk factors. Because the conventional Fama and MacBeth (1973) methodology is jeopardized by misspecification…

We consider that the price of a firm follows a non linear stochastic delay differential equation. We also assume that any claim value whose value depends on firm value and time follows a non linear stochastic delay differential equation.…

Stochastic dividend discount models (Hurley and Johnson, 1994 and 1998, Yao, 1997) present expressions for the expected value of stock prices when future dividends evolve according to some random scheme. In this paper we try to offer a more…

Despite the popularity of sparse factor models, little attention has been given to formally address identifiability of these models beyond standard rotation-based identification such as the positive lower triangular constraint. To fill this…

We propose a model which can be jointly calibrated to the corporate bond term structure and equity option volatility surface of the same company. Our purpose is to obtain explicit bond and equity option pricing formulas that can be…

We derive a general multivariate theory for realised characteristics of `model-free discretisation-invariant swaps', so-called because the standard no-arbitrage assumption of martingale forward prices is sufficient to derive fair-value swap…

In dealing with high-dimensional data sets, factor models are often useful for dimension reduction. The estimation of factor models has been actively studied in various fields. In the first part of this paper, we present a new approach to…

In this paper, we propose a price staleness factor model that accounts for pervasive market friction across assets and incorporates relevant covariates. Using large-panel high-frequency data, we derive the maximum likelihood estimators of…

We consider a general one-factor short rate model, in which the instantaneous interest rate is driven by a univariate diffusion with time independent drift and volatility. We construct recursive formula for the coefficients of the Taylor…

This paper develops estimation and inference methods for conditional quantile factor models. We first introduce a simple sieve estimation, and establish asymptotic properties of the estimators under large $N$. We then provide a bootstrap…