Motivated by existing evidence of a preference among investors for assets with lottery-like payoffs and that many investors are poorly diversified, we investigate the significance of extreme positive returns in the cross-sectional pricing of stocks. Portfolio-level analyses and firm-level...

Using equity returns for financial institutions we estimate both catastrophic and operational risk measures over the period 1973-2003. We find evidence of cyclical components in both the catastrophic andoperational risk measures obtained from the Generalized Pareto Distribution and the Skewed...

This paper introduces a conditional extreme value volatility estimator (EVT) based on high-frequency returns. The relative performance of the extreme value volatility estimator is compared with the discrete-time GARCH and implied volatility models for 1-day and 20-day-ahead forecasts of realized...

This paper examines the proportion of wealth invested in stock and bond portfolios as a function of the investors' age, i.e., investment horizon. It has become increasingly popular to advice investors to relocate their funds from a primarily stock portfolio to a primarily bond portfolio as they...

This paper proposes an extreme value approach to estimating the term structure of interest rate volatility, and shows that the volatility of interest rate changes is overestimated by the standard approach that uses the thin-tailed normal distribution. The volatility of maximal and minimal...

This paper analyzes one potential source of misspecification of existing models of the short-term interest rate and introduces a new class of discrete-time econometric specifications that nests many existing interest rate models as special cases. In existing continuous-time or time-series...

This paper focuses on pricing Eurodollar futures options using the single-factor Black, Derman, and Toy (1990) term structure model with particular emphasis on yield curve smoothing. Of the various approaches, the maximum smoothness forward rate approach developed by Adams and van Deventer...

This paper concentrates on the effects of different class of volatility estimators in pricing interest rate sensitive options using the single-factor Black, Derman, and Toy [1990] model. We employ the moving average, such as constantly-weighted and exponentially-weighted moving average, and the...

I introduce two-factor discrete time stochastic volatility models of the short-term interest rate to compare the relative performance of existing and alternative empirical specifications. I develop a nonlinear asymmetric framework that allows for comparisons of non-nested models featuring...

Motivated by existing evidence of a preference among investors for assets with lottery-like payoffs and that many investors are poorly diversified, we investigate the significance of extreme positive returns in the cross-sectional pricing of stocks. Portfolio-level analyses and firm-level...