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 …

risk. The key insight behind our importance sampling based approach is the sequential construction of marginal and …We present an accurate and efficient method for Bayesian forecasting of two financial risk measures, Value-at-Risk and … Expected Shortfall, for a given volatility model. We obtain precise forecasts of the tail of the distribution of returns not …

of the causes of systematic risk and shows that (i) network exposures act as an inflating factor for systematic exposure …

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

law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory …Because levered equity is an option on the firm, variations in asset idiosyncratic risk (ivol) induces a negative … equity than for assets, and stronger for more levered firms — consistent with the theory. We test also the timeseries …

We analyze an environment where the uncertainty in the equity market return and its volatility are both stochastic, and … conditional equity premium and risk-free rate in equilibrium. Our empirical analysis shows that the equity premium appears to be … earned for facing uncertainty, especially high uncertainty that is disconnected from lower volatility, rather than for facing …

This paper decomposes the risk premia of individual stocks into contributions from systematic and idiosyncratic risks … 80% of the equity and variance risk premia, respectively. I provide a categorization of sectors based on the risk profile …

results in a state-dependent idiosyncratic risk premium that is higher when average idiosyncratic volatility is low, and vice …In Merton (1987), idiosyncratic risk is priced in equilibrium as a consequence of incomplete diversification. We modify … his model to allow the degree of diversification to vary with average idiosyncratic volatility. This simple recognition …