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On fund mapping regressions applied to segregated funds hedging under regime-switching dynamics

Trottier, Denis-Alexandre; Godin, Frédéric; Hamel, … - In: Risks : open access journal 6 (2018) 3, pp. 1-15

Insurers issuing segregated fund policies apply dynamic hedging to mitigate risks related to guarantees embedded in … the imperfect correlation between the underlying fund and its corresponding hedging instruments. The current work … discusses the implications of using fund mapping regressions when the joint dynamics of the underlying and hedging assets is a …

Persistent link: https://www.econbiz.de/10011890772

Funding illiquidity implied by S&P 500 derivatives

Golez, Benjamin; Jackwerth, Jens Carsten; Slavutskaya, Anna - In: Risks : open access journal 12 (2024) 9, pp. 1-33

Based on the typical positions of S&P 500 option market makers, we derive a funding illiquidity measure from quoted prices of S&P 500 derivatives. Our measure significantly affects the returns of leveraged managed portfolios; hedge funds with negative exposure to changes in funding illiquidity...

Persistent link: https://www.econbiz.de/10015070429

Combining alphas via bounded regression

Kakushadze, Zura - In: Risks : open access journal 3 (2015) 4, pp. 474-490

We give an explicit algorithm and source code for combining alpha streams via bounded regression. In practical applications, typically, there is insufficient history to compute a sample covariance matrix (SCM) for a large number of alphas. To compute alpha allocation weights, one then resorts to...

Persistent link: https://www.econbiz.de/10011402659

Optimal design of multi-asset options

Balbás de la Corte, Alejandro; Balbás, Beatriz; … - In: Risks : open access journal 13 (2025) 1, pp. 1-20

The combination of stochastic derivative pricing models and downside risk measures often leads to the paradox (risk, return) = (−infinity, +infinity) in a portfolio choice problem. The construction of a portfolio of derivatives with high expected returns and very negative downside risk...

Persistent link: https://www.econbiz.de/10015333614

Automated machine learning and asset pricing

Healy, Jerome V.; Gregoriou, Andros; Hudson, Robert - In: Risks : open access journal 12 (2024) 9, pp. 1-12

We evaluate whether machine learning methods can better model excess portfolio returns compared to the standard regression-based strategies generally used in the finance and econometric literature. We examine 17 benchmark factor model specifications based on Expected Utility Theory and theory...

Persistent link: https://www.econbiz.de/10015066381

Cooperative game theory of hierarchies : one approach to solving the low-risk puzzle?

Hiller, Tobias - In: Risks : open access journal 13 (2025) 5, pp. 1-20

In this article, we extend the application of cooperative game theory to the so-called low-risk puzzle. Specifically, we apply concepts that consider hierarchies on the assets in the allocation of portfolio risk. These hierarchies have not previously been considered in portfolio risk allocation...

Persistent link: https://www.econbiz.de/10015409028

Deep equal risk pricing of financial derivatives with non-translation invariant risk measures

Carbonneau, Alexandre; Godin, Frédéric - In: Risks : open access journal 11 (2023) 8, pp. 1-27

applied to the conventional deep hedging training algorithm so as to enable obtaining a price through a single training run … for the two neural networks associated with the respective long and short hedging strategies. The accuracy of the neural …

Persistent link: https://www.econbiz.de/10014391590

An unhedgeable Black-Scholes-Merton implicit option?

Pereira, Alfredo M.; Tarter, M. Sean - In: Risks : open access journal 10 (2022) 7, pp. 1-12

In this paper, we focus on an implicit assumption in the BSM framework that limits the scope of market network connections to seeking gains in the currency basis, i.e., on trading strategies between the numeraire and the stock and between the numeraire and the option, separately. We relax this...

Persistent link: https://www.econbiz.de/10013364966

A guaranteed-return structured product as an investment risk-hedging instrument in pension savings plans

Afik, Zvika; Hadad, Elroi; Yosef, Rami - In: Risks : open access journal 11 (2023) 6, pp. 1-16

This study proposes a structured product (SP) for hedging defined contribution pension fund members against capital …

Persistent link: https://www.econbiz.de/10014334531

A managed volatility investment strategy for pooled annuity products

Li, Shuanglan; Labit Hardy, Héloïse; Sherris, Michael; … - In: Risks : open access journal 10 (2022) 6, pp. 1-30

Pooled annuity products, where the participants share systematic and idiosyncratic mortality risks as well as investment returns and risk, provide an attractive and effective alternative to traditional guaranteed life annuity products. While longevity risk sharing in pooled annuities has...

Persistent link: https://www.econbiz.de/10013363078