This paper analyzes the risks in random sets and their implications for basket derivatives. Based on an extension of integration by parts for random set, we define stochastic dominance of order 1 and 2 for random sets. Since the ordering of sets, that is the inclusion, is a partial order, we...

We develop a continuous-time intertemporal CAPM model that allows for risky beta exposure, which we explicitly specify. In the model, the expected return on a stock depends on beta's co-movement with market variance and more generally with the stochastic discount factor and deviates from the...

One of the objectives of the recent prudential regulation is to separate the computation of required capital for short- and long-run risks. This paper provides a coherent framework to define, compute, and update these components. We provide different examples, among which is the transition to...