In this paper, we formally show that the cross-sectional variance of stock returns is a consistent and asymptotically efficient estimator for aggregate idiosyncratic volatility. This measure has two key advantages: it is model-free and observable at any frequency. Previous approaches have used...

An investment horizon is in practice not frequently known with certainty at the initial investment date. This paper addresses the problem of pricing and hedging a random cash-flow received at a random date in a general stochastic environment. We first argue that specific timing risk is induced...

While there has been a significant amount of research on the predictability of traditional asset classes, very little is known about the predictability of returns emanating from alternative vehicles such as hedge funds. This is perhaps surprising, given that significant attempts at structuring...

This paper attempts to evaluate the out-of-sample performance of an improved estimator of the covariance structure of hedge fund index returns, focusing on its use for optimal portfolio selection. Using data from CSFB-Tremont hedge fund indices, we find that ex-post volatility of minimum...

While there are now a number of empirical studies on the subject, very little is known on the market price for default risk from a theoretical perspective. This paper is a first step in the direction of an equilibrium model for the pricing of defaultable securities in an incomplete market setup....