The relationship between risk and return is one of the most studied topics in finance. The majority of the literature … is based on a linear, parametric relationship between expected returns and conditional volatility. This paper models the …-realized variance. We find strong robust evidence of volatility feedback in monthly data. Once volatility feedback is accounted for …

This paper presents a method for Bayesian nonparametric analysis of the return distribution in a stochastic volatility … series and two stock index return series. We find that estimates of volatility using the model can differ dramatically from …

risk and return of two pairs trading strategies: a conditional statistical arbitrage method and an implicit arbitrage one … uncertainty with risk and return of stock trading. In terms of methodology, we show the effect that using an encompassing prior … better results in terms of profit per capital engagement and risk than using a standard linear normalization …

We quantify crash risk in currency returns. To accomplish this task, we develop and estimate an empirical model of …% (and can be as high as 40%) of total currency risk, as measured by the entropy of exchange rate changes, over horizons of … smiles and that jump risk is priced …

market volatility is modeled to have two components, one due to the diffusion risk and the other due to the jump risk. The … existence of leverage effects, the return-volatility relations are determined by interactions between risk premia and leverage …This paper investigates the return-volatility relation by taking into account the model specification problem. The …

This paper introduces a new tail risk measure based on the risk-neutral excess expected shortfall of a cross-section of … stock returns. We propose a novel way to risk neutralize the returns without relying on option price information …. Empirically, we illustrate our methodology by estimating a tail risk measure over a long historical period based on a set of size …

We implement a long-horizon static and dynamic portfolio allocation involving a risk-free and a risky asset. This model …