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The Limits of Diversification and the Pricing of Tail Risk

Cruz Lopez, Jorge - 2011

This paper adopts a copula approach at assessing the dependence structure of the U.S. equity market. Seven types of copulas are considered: Gaussian, Student t, Clayton, rotated Clayton, Gumbel, rotated Gumbel and BB4. By adopting a twenty-two year sample of daily returns on the seventeen Fama...

Persistent link: https://www.econbiz.de/10013133874

Keep it Simple : Dynamic Bond Portfolios Under Parameter Uncertainty

Feldhütter, Peter - 2012

We empirically investigate the importance of parameter uncertainty to bond investors. Using a Bayesian approach, we quantify the expected utility loss due to parameter uncertainty from following seemingly optimal dynamic portfolio strategies. Expected utility losses are increasing in the number...

Persistent link: https://www.econbiz.de/10013109502

Many Risks, One (Optimal) Portfolio

Homescu, Cristian - 2014

Persistent link: https://www.econbiz.de/10013050012

Joint extreme events in equity returns and liquidity and their cross-sectional pricing implications

Ruenzi, Stefan; Ungeheuer, Michael; Weigert, Florian - 2020 - This version: January 2020

We merge the literature on downside return risk and liquidity risk and introduce the concept of extreme downside liquidity (EDL) risks. The cross-section of stock returns reflects a premium if a stock's return (liquidity) is lowest at the same time when the market liquidity (return) is lowest....

Persistent link: https://www.econbiz.de/10012175486

Hedge Fund Seeding Via Fees-for-Seed Swaps Under Idiosyncratic Risk

Ewald, Christian-Oliver - 2019

We develop a dynamic valuation model of the hedge fund seeding business by solving the consumption and portfolio-choice problem for a risk-averse manager who launches a hedge fund through a seeding vehicle. This vehicle, i.e. fees-for-seed swap, specifies that a strategic partner (seeder)...

Persistent link: https://www.econbiz.de/10012904759

Quantile Hedging in a Semi-Static Market with Model Uncertainty

Bayraktar, Erhan - 2017

minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time, semi …-static market of stocks and options. Based on duality results which link quantile hedging to a randomized composite hypothesis test … measure, which guarantees the existence of the optimal hedging strategy and enables numerical calculation of the quantile …

Persistent link: https://www.econbiz.de/10012972859

Integrated Dynamic Models for Hedging International Portfolio Risks

Topaloglou, Nikolas - 2018

We develop scenario-based stochastic programming models for hedging the risks of international portfolios using options … single-stage model with currency options for selective hedging of FX risks, while market risk is addressed only through … risk management. Simultaneous hedging of market and FX risks using stock and currency options yields the best ex …

Persistent link: https://www.econbiz.de/10012924570

Would Ambiguity Averse Investors Hedge Risk in Equity Markets?

Gertsman, Gleb - 2020

This paper studies the conjecture that investors prefer derivative markets over the equity market when hedging risks … derivatives with less beta uncertainty (TIPS and options) are introduced. In line with this theory, we find that the inflation …

Persistent link: https://www.econbiz.de/10012846419

The Risk of Beta – Investor Learning and Prospect Theory

Baur, Dirk G. - 2010

weekly data and prospect theory for monthly data. The results demonstrate that the risk of a stock can be underestimated or …

Persistent link: https://www.econbiz.de/10013148953

Do the Rich Gamble in the Stock Market? Low Risk Anomalies and Wealthy Households

Bali, Turan G.; Günaydin, A. Doruk; Jansson, Thomas; … - 2021

Contrary to the theoretical principle that higher risk is compensated with higher expected return, the literature shows that low-risk stocks outperform high-risk stocks. Using a large-scale household dataset, we provide an explanation for this puzzling result that the anomalous negative...

Persistent link: https://www.econbiz.de/10013240163