We consider a homogeneous class of assets, whose returns are driven by an unobservable factor representing systematic risk. We derive approximated pricing formulas for the future factor values and their proxies, when the size n of the class is large. Up to order 1/n, these closed-form...

This paper studies the problem of disentangling risk correlation and contagion in a set of individual binary processes. The two admissible values correspond to bad and good risk states of an individual. The risk correlation is captured by introducing a dynamic frailty, whereas the contagion...

In this paper we examine the dependence between the liquidation risks of individual hedge funds. This dependence can result either from common exogenous shocks (shared frailty), or from contagion phenomena, which occur when an endogenous behaviour of a fund manager impacts the Net Asset Values...

There is a growing literature on the possibility to identify correlation and contagion in qualitative risk analysis. Our paper considers this question by means of a model describing the joint dynamics of a set of individual binary processes. The two admissible values correspond to bad and good...

The recursive prediction and filtering formulas of the Kalman filter are difficult to implement in nonlinear state space models since they require the updating of a function. The aim of this paper is to consider the situation of a large number n of individual measurements, called...

We study positional portfolio management strategies in which the manager maximizes an expected utility function written on the cross-sectional rank (position) of the portfolio return. The objective function reflects the manager's goal to be well-ranked among competitors. To implement positional...