We characterize the robustness of subsampling procedures by deriving a general formula for the breakdown point of subsampling quantiles. This breakdown point can be very low for moderate subsampling block sizes, which implies the fragility of subsampling procedures, even if they are applied to...

We introduce a new class of flexible and tractable matrix a±ne jump-diffusions (AJD) to modelmultivariate sources of financial risk. We first provide a complete transform analysis of this model class,which opens a range of new potential applications to, e.g., multivariate option pricing with...

This paper analyzes the relation between correlation risk and the cross-section of hedge fund returns.Legal framework and investment mandate imply that hedge funds can be severely exposed tocorrelation risk: Hedge funds ability to enter long-short positions can be useful to reduce marketbeta,...

In a Lucas orchard with heterogeneous beliefs, we study the link between market-wide uncertainty, difference of opinionsand co-movement of stock returns. We show that this link plays an important role in explaining the dynamics of equilibriumvolatility and correlation risk premia. In our...

We derive representations for the stock price drift and volatility in theequilibrium of agents with arbitrary, heterogeneous utility functionsand with the aggregate dividend following an arbitrary Markov diffusion.We introduce a new, intrinsic characteristic of the aggregate dividendprocess that...

Changing noise levels have a severe impact on house prices and through the leveragein nancing on households wealth. This risk is essential for houses close to airportswith uncertain aircraft regimes. We design and calibrate real options based on aircraftnoise to hedge against noise risk. The...

We consider an homogeneous class of assets, whose returns are driven by an unobservablefactor. We derive approximated prediction and pricing formulas for the future factorvalues and their proxies, when the size n of the class is large. Up to order 1=n, these approximationsinvolve solely...

Although examples of deception and fraud in business have generated widespread interest in themotivations for honest behavior, little is known about individual differences in the propensity totell the truth. This paper highlights the role of honesty as a protected value, maintaining thatsome...

This paper examines the role of bond ratings and the effects of rating-based regulations in thecorporate bond market. Exploiting an unanticipated mechanical change in how the benchmarkLehman bond indices are constructed in 2005, we show that rating-induced market segmentationof the bond market...

The well-known absence-of-arbitrage condition NFLVR from the fundamentaltheorem of asset pricing splits into two conditions, called NA and NUPBR.We give a literature overview of several equivalent reformulations of NUPBR;these include existence of a growth-optimal portfolio, existence of the...