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 …

asset prices reflect both covariance risk and misperceptions of firmsapos prospects, and in which arbitrageurs trade against … mispricing. In equilibrium, expected returns are linearly related to both risk and mispricing measures (e.g., fundamental …. The theory offers untested empirical implications about volume, volatility, fundamental/price ratios, and mean returns …

distributions by deriving the closed-form expressions for the Conditional Value at Risk, a risk measure that is closely related to …

, correlation risk became very significant. in 2007, indeed most of the exotic equity portfolios were mismarked because of this risk … Correlation Model (UCM) that takes into account the correlation risk in equity derivatives modelling. We consider two versions of …The correlation is a big modelling problem, "One of the most interesting in the Equity World". In the last decade …

Gini-type correlation coefficients have become increasingly important in a variety of research areas, including …, naturally, the classical Pearson correlation coefficient is of little use. On the other hand, it has been observed that when … light-tailed situations are of interest, and hence when both the Gini-type and Pearson correlation coefficients are well …

The level of capital requirement generated by the IRB approach depends crucially on the asset correlation, a parameter … that enters the regulatory risk weight formula and is determined by the Regulators. Several studies have estimated the … the regulatory risk measures easily interpretable figures i.e. the Worst-Case Default Rate (WCDR) and the Worst-Case Loss …

This paper estimates univariate and multivariate conditional volatility and conditional correlation models of spot … aid in risk diversification. Conditional correlations are estimated using the CCC model of Bollerslev (1990), VARMA …

risk factors. Risk factor correlation increases when investor sentiment worsens. This suggests that corporate bond … investors change their perception of risk factors, which results in higher risk factor correlation and finally higher bond …Diversification benefits depend on the correlation between assets. Unfortunately, asset correlation increases when it …

risk aggregation. The so-called "square-root formula" uses correlation parameters between, for example, market risk, non …Modern regulatory capital standards, such as the Solvency II standard formula, employ a correlation based approach for …-life insurance risk and default risk to determine the company's aggregate capital requirement. To support decision-making, companies …

-to-market firms investing less and demanding higher risk premia compared to unconstrained, low book-to-market firms. The value premium … countercyclicality of the value premium (iii) the negative correlation between the two, and (iv) severe losses to momentums strategies …