In this paper I present a new single factor stochastic volatility model for asset return observed in discrete time and its latent volatility. This model unites the feedback effect and return skewness using a common factor for return and its volatility. Further, it generalizes the existing...

We generalize existing structural credit risk models that account for contagion effects across economic sectors, to capture the impact of neglected skewness and excess kurtosis in the asset return process, on the shape of the credit loss distribution. We specify Skew-Normal and Skew-Student t...

The purpose of this paper is to demonstrate that a portfolio optimization model using the L₁ risk (mean absolute deviation risk) function can remove most of the difficulties associated with the classical Markowitz's model while maintaining its advantages over equilibrium models. In particular,...