An Analysis of Risk Assessment Questions Based on Loss
... variation in future consumption. Individuals who are more willing to accept variation in future consumption are more risk tolerant or less risk averse. Individuals with a low level of risk tolerance will prefer a less volatile consumption path over their life span compared to someone who has a great ...
... variation in future consumption. Individuals who are more willing to accept variation in future consumption are more risk tolerant or less risk averse. Individuals with a low level of risk tolerance will prefer a less volatile consumption path over their life span compared to someone who has a great ...
NBER WORKING PAPER SERIES PRICE Nicolae Gârleanu
... the Law of One Price: securities with (nearly) identical cash flows traded at different prices, giving rise to so-called “bases” (i.e., price gaps). We attempt to explain these effects using a dynamic general-equilibrium model with realistic margin constraints, and to empirically test the model’s ti ...
... the Law of One Price: securities with (nearly) identical cash flows traded at different prices, giving rise to so-called “bases” (i.e., price gaps). We attempt to explain these effects using a dynamic general-equilibrium model with realistic margin constraints, and to empirically test the model’s ti ...
Supplementary Material to - University of Notre Dame
... In my model, discount rate news is driven by risk-free rate dynamics, which are in turn driven by innovations in consumption growth. This, together with ψ equaling one, explains why the second terms in the cash flow beta and in the discount rate beta offset each other. The cash flow covariance meas ...
... In my model, discount rate news is driven by risk-free rate dynamics, which are in turn driven by innovations in consumption growth. This, together with ψ equaling one, explains why the second terms in the cash flow beta and in the discount rate beta offset each other. The cash flow covariance meas ...
NBER WORKING PAPER SERIES Hanno Lustig
... value of the housing stock was low relative to output, while the gradual decline in the equity premium in the post-war period coincided with a sustained increase in housing values. This time-variation in equity premia cannot be accounted for in standard asset pricing models (Breeden (1979) and Lucas ...
... value of the housing stock was low relative to output, while the gradual decline in the equity premium in the post-war period coincided with a sustained increase in housing values. This time-variation in equity premia cannot be accounted for in standard asset pricing models (Breeden (1979) and Lucas ...
(Ab)Use of Omega?
... strategies and of their impact, either in terms of deviations from the benchmark or in terms of risk/return. Despite some limitations, the Sharpe (1966) ratio is still considered as the reference performance measure. If we derive this ratio within a Markowitz framework, it shares the same drawbacks ...
... strategies and of their impact, either in terms of deviations from the benchmark or in terms of risk/return. Despite some limitations, the Sharpe (1966) ratio is still considered as the reference performance measure. If we derive this ratio within a Markowitz framework, it shares the same drawbacks ...
CORRELATION STRUCTURE OF INTERNATIONAL EQUITY MARKETS DURING EXTREMELY VOLATILE PERIODS
... different from ±1, then the return exceedances of all variables tend to independence as the threshold used to define the tails tends to the upper endpoint of the distribution of returns (+∞ for the normal distribution). In particular, the asymptotic correlation of extreme returns is equal to zero. F ...
... different from ±1, then the return exceedances of all variables tend to independence as the threshold used to define the tails tends to the upper endpoint of the distribution of returns (+∞ for the normal distribution). In particular, the asymptotic correlation of extreme returns is equal to zero. F ...
Probability and Impact Rating System
... control frameworks, nor will they necessarily require the same level of management capability. Rather, it is critical that an entity’s management and control framework be commensurate with the inherent risks assumed. Regulated entities should have systems in place to manage and control existing risk ...
... control frameworks, nor will they necessarily require the same level of management capability. Rather, it is critical that an entity’s management and control framework be commensurate with the inherent risks assumed. Regulated entities should have systems in place to manage and control existing risk ...
On Constructing a Market Consistent Economic Scenario
... liabilities is to reproduce the price the liabilities would be traded at, if they were in fact traded on the market. In order to do this it is important that the ESG can reproduce market prices of assets which have similar characteristics to the liability being valued. The liabilities stemming from ...
... liabilities is to reproduce the price the liabilities would be traded at, if they were in fact traded on the market. In order to do this it is important that the ESG can reproduce market prices of assets which have similar characteristics to the liability being valued. The liabilities stemming from ...
Measuring the Risk of Large Losses
... Average value at risk can be used as a building block for a much larger class of distributioninvariant risk measures via robust representation, see Föllmer & Schied (2004), Kusuoka (2001) and Kunze (2003). Average value at risk is a distribution-invariant risk measure that is convex and positively ...
... Average value at risk can be used as a building block for a much larger class of distributioninvariant risk measures via robust representation, see Föllmer & Schied (2004), Kusuoka (2001) and Kunze (2003). Average value at risk is a distribution-invariant risk measure that is convex and positively ...
Dividend Growth and the Quest for Yield
... The “S&P 500® Dividend Aristocrats® Index” is a product of S&P Dow Jones Indices LLC and its affiliates and has been licensed for use by ProShares. “S&P®” is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”) and “Dow Jones®” is a registered trademark of Dow Jones Trademark H ...
... The “S&P 500® Dividend Aristocrats® Index” is a product of S&P Dow Jones Indices LLC and its affiliates and has been licensed for use by ProShares. “S&P®” is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”) and “Dow Jones®” is a registered trademark of Dow Jones Trademark H ...
Dissecting Anomalies
... Micro, Small, Big, and All but Micro stocks. It also shows the average number of stocks and the average percent of the total market capitalization (market cap) in each size group each month. Finally, it shows the averages of annual EW average values and annual cross-section standard deviations of th ...
... Micro, Small, Big, and All but Micro stocks. It also shows the average number of stocks and the average percent of the total market capitalization (market cap) in each size group each month. Finally, it shows the averages of annual EW average values and annual cross-section standard deviations of th ...
General Black-Scholes models accounting for increased market
... volatility2 for values of the fraction of the market portfolio subject to portfolio insurance varying between 1% and 20%. In similar vein, Frey and Stremme [11] present a discrete time and then a continuous time economy of reference traders (Black-Scholes upholders) and program traders (portfolio in ...
... volatility2 for values of the fraction of the market portfolio subject to portfolio insurance varying between 1% and 20%. In similar vein, Frey and Stremme [11] present a discrete time and then a continuous time economy of reference traders (Black-Scholes upholders) and program traders (portfolio in ...
Margin-Based Asset Pricing and Deviations from the Law of One Price
... The paramount role of funding constraints has become apparent in the global liquidity crisis that started in 2007. Banks unable to fund their operations closed down, and the funding problems spread to other investors such as hedge funds who relied on bank funding. Therefore, traditional liquidity p ...
... The paramount role of funding constraints has become apparent in the global liquidity crisis that started in 2007. Banks unable to fund their operations closed down, and the funding problems spread to other investors such as hedge funds who relied on bank funding. Therefore, traditional liquidity p ...
Analysing and Decomposing the Sources of Added
... between the impact of introducing them in performance-seeking portfolios and the impact of introducing them in liability-hedging portfolios. From a formal standpoint, our analysis is cast within the context of the liability-driven investing (LDI) paradigm, a disciplined investment framework that adv ...
... between the impact of introducing them in performance-seeking portfolios and the impact of introducing them in liability-hedging portfolios. From a formal standpoint, our analysis is cast within the context of the liability-driven investing (LDI) paradigm, a disciplined investment framework that adv ...
Understanding the Profitability of Pairs Trading
... This paper studies the profitability of pair trading. Since the mid-1980s such strategies have constituted a rather secretive and lucrative part of Wall Street activity. Pairs trading is a type of relative value strategy that buys an overpriced security and simultaneously sells a similar, underprice ...
... This paper studies the profitability of pair trading. Since the mid-1980s such strategies have constituted a rather secretive and lucrative part of Wall Street activity. Pairs trading is a type of relative value strategy that buys an overpriced security and simultaneously sells a similar, underprice ...
Shifting the Lens – A De-Risking Toolkit for Impact Investment
... With this in mind, adjusting the risk side of the equation is not a one-size-fits-all approach. It requires an understanding of who the target investor is and what they expect; which risk factors are therefore most relevant; and how to lower the probability that those risk factors will affect perfor ...
... With this in mind, adjusting the risk side of the equation is not a one-size-fits-all approach. It requires an understanding of who the target investor is and what they expect; which risk factors are therefore most relevant; and how to lower the probability that those risk factors will affect perfor ...
How to account for interdependence of risk in …nancial markets?
... Future version of this work we employ also symmetric student t distribution, and Hansen (1994) skew-student t distribution. ...
... Future version of this work we employ also symmetric student t distribution, and Hansen (1994) skew-student t distribution. ...
the relationship between transaction costs of external financing and
... create a need for additional financing, since they indicate higher financial needs for asset investments. An inverse relationship was expected between DPR and both EXCAP and GROWTH. Another variable employed by Alli et al. is the variability in the capital structure. It was used as a proxy for a co ...
... create a need for additional financing, since they indicate higher financial needs for asset investments. An inverse relationship was expected between DPR and both EXCAP and GROWTH. Another variable employed by Alli et al. is the variability in the capital structure. It was used as a proxy for a co ...
The Case for Strategic Convertible Allocations
... fixed-income-like in others. Because of their structural complexities, convertible securities demand active management within asset allocations. Often, convertible securities are thought of as a single asset class; this ignores the variations within the convertible universe. Our approach is to use d ...
... fixed-income-like in others. Because of their structural complexities, convertible securities demand active management within asset allocations. Often, convertible securities are thought of as a single asset class; this ignores the variations within the convertible universe. Our approach is to use d ...
Idiosyncratic Risk and the Cross-Section of Stock Returns Ren´
... (1987) and Malkiel and Xu (2002) pricing models relate stock returns to their beta with the market and their beta to market-wide measures of idiosyncratic risk. In these models, an important portion of investors’ portfolios may differ from the market. Their holdings may be affected by corporate comp ...
... (1987) and Malkiel and Xu (2002) pricing models relate stock returns to their beta with the market and their beta to market-wide measures of idiosyncratic risk. In these models, an important portion of investors’ portfolios may differ from the market. Their holdings may be affected by corporate comp ...
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... the January 1993 December 1997 subperiod. In this subperiod, we get the evidence of the statistically significant one-day lagged effect of large cap portfolio returns on small cap portfolio returns. There is also an effect of one-day lagged small cap portfolio returns on large cap portfolio returns ...
... the January 1993 December 1997 subperiod. In this subperiod, we get the evidence of the statistically significant one-day lagged effect of large cap portfolio returns on small cap portfolio returns. There is also an effect of one-day lagged small cap portfolio returns on large cap portfolio returns ...
Cumulative Prospect Theory, Aggregation, and Pricing
... a complete market is insufficient to guarantee that the set of efficient portfolios is convex, as is guaranteed for risk-averse investors who use objective probabilities. This means that there may be no representative agent who holds the average or market portfolio. Unfortunately, a representative i ...
... a complete market is insufficient to guarantee that the set of efficient portfolios is convex, as is guaranteed for risk-averse investors who use objective probabilities. This means that there may be no representative agent who holds the average or market portfolio. Unfortunately, a representative i ...
REITs and Real Estate
... Commercial real estate has reported stellar returns following the real estate downturn of 2008–09. Following returns of 13% in 2010 and 14% in 2011, NCREIF Property Index (NPI) returns have since settled into a range of 10–11%. Similarly, FTSE-NAREIT All Equity returns have been healthy, with the in ...
... Commercial real estate has reported stellar returns following the real estate downturn of 2008–09. Following returns of 13% in 2010 and 14% in 2011, NCREIF Property Index (NPI) returns have since settled into a range of 10–11%. Similarly, FTSE-NAREIT All Equity returns have been healthy, with the in ...
Ijara by Zubair Usmani
... promisor only. 13. Sub-Lease If the leased asset is used differently by different users, the lessee cannot sub-lease the leased asset except with the express permission of the lessor. ...
... promisor only. 13. Sub-Lease If the leased asset is used differently by different users, the lessee cannot sub-lease the leased asset except with the express permission of the lessor. ...
An Empirical Analysis of the Profitability of Technical Analysis
... economists is that markets are efficient, considering transaction costs and allowing for some behavioral biases on a micro-level. Much empirical evidence support this notion too, and many studies that find technical rules to outperform a market benchmark are criticized for cherry picking results an ...
... economists is that markets are efficient, considering transaction costs and allowing for some behavioral biases on a micro-level. Much empirical evidence support this notion too, and many studies that find technical rules to outperform a market benchmark are criticized for cherry picking results an ...
Beta (finance)
In finance, the beta (β) of an investment is a measure of the risk arising from exposure to general market movements as opposed to idiosyncratic factors. The market portfolio of all investable assets has a beta of exactly 1. A beta below 1 can indicate either an investment with lower volatility than the market, or a volatile investment whose price movements are not highly correlated with the market. An example of the first is a treasury bill: the price does not go up or down a lot, so it has a low beta. An example of the second is gold. The price of gold does go up and down a lot, but not in the same direction or at the same time as the market.A beta greater than one generally means that the asset both is volatile and tends to move up and down with the market. An example is a stock in a big technology company. Negative betas are possible for investments that tend to go down when the market goes up, and vice versa. There are few fundamental investments with consistent and significant negative betas, but some derivatives like equity put options can have large negative betas.Beta is important because it measures the risk of an investment that cannot be reduced by diversification. It does not measure the risk of an investment held on a stand-alone basis, but the amount of risk the investment adds to an already-diversified portfolio. In the capital asset pricing model, beta risk is the only kind of risk for which investors should receive an expected return higher than the risk-free rate of interest.The definition above covers only theoretical beta. The term is used in many related ways in finance. For example, the betas commonly quoted in mutual fund analyses generally measure the risk of the fund arising from exposure to a benchmark for the fund, rather than from exposure to the entire market portfolio. Thus they measure the amount of risk the fund adds to a diversified portfolio of funds of the same type, rather than to a portfolio diversified among all fund types.Beta decay refers to the tendency for a company with a high beta coefficient (β > 1) to have its beta coefficient decline to the market beta. It is an example of regression toward the mean.