This paper studies the optimal asset allocation problem of an investor with a portfolio given by the U.S. risk-free asset and a carry trade benchmark comprising the currencies of the G10 countries. Our optimal strategy is able to adapt to macroeconomic conditions and avoid the so-called crash...

This paper proposes a new approach for estimating and forecasting the moments and probability density function of daily financial returns from intraday data. This is achieved through a new application of the distributional scaling laws for the class of multifractal processes. Density forecasts...

This paper investigates the information content of the ex post overnight return for one-day-ahead equity Value-at-Risk (VaR) forecasting. To do so, we deploy a univariate VaR modeling approach that constructs the forecast at market open and, accordingly, exploits the available overnight...

This article studies the statistical significance of the set of market sentiment variables proposed by Baker and Wurgler (2006) to predict the risk premium on U.S. sovereign bonds. We show that these variables can be summarized in one single market sentiment factor similar in spirit to the...

We show in this paper that volatility measures can be misleading indicators of risk if returns do not follow a Gaussian distribution. A more reliable measure of risk is the probability distribution of the return on an asset. Estimators for these measures are usually challenging and need of...

One of the implications of the creation of Basel Committee on Banking Supervision was the implementation of Value-at-Risk (VaR) as the standard tool for measuring market risk. Since then, the capital requirements of commercial banks with trading activities are based on VaR estimates. Therefore,...

We show in this paper that volatility measures can be misleading indicators of risk if returns do not follow a Gaussian distribution. A more reliable measure of risk is the probability distribution of the return on an asset. Estimators for these measures are usually challenging and need of...