Recently many research articles have focused on the prediction of stock returns using machine learning methods. All show that regression trees and neural networks have superior predicting power than linear models. In this paper we analyze the performance of investable portfolios built using...

We analyze the performance of investable portfolios built using predicted stock returns from machine learning methods and attribute their performance to linear, marginal non-linear and interaction effects. We use a large set of features including price-based, fundamental-based, and...

Finally, Stéphane Daul and Elena Gutíerrez Vidal present a set of case studies on insurance liability replication. Under modern valuation conventions, insurance firms increasingly use market-consistent techniques to value both their assets and liabilities. Consequently, the market...

A traditional VaR approach is not suitable to assess the risk that merger arbitrage funds carry in their portfolios. We propose a simple two-state or three-state model that captures the risk characteristics of the deals in which merger arbitrage funds invest.This model has been tested on a set...

We present a model that captures risks of hedge funds only using their historical performance as input. This statistical model is a multivariate distribution where the marginals derive from an AR(1)/AGARCH(1,1) process with t_5 innovations, and the dependency is a grouped-t copula. The process...

A traditional VaR approach is not suitable to assess the risk of merger arbitrage hedge funds. We recently proposed a simple two- or three-state model that captures the risk characteristics of the deals in which merger arbitrage funds invest. Here, we refine the model, and demonstrate that it...

Fixed-income managers need specialized attribution models that for example incorporate all the effects of yield-curve movements. The route is the factor based approach, where the performance of all securities is first decomposed using systematic factors and then aggregated. We consider a...

We describe a model that takes into account the tail dependence present in a large set of historical risk factor data using the modern concept of copulas. We extend the popular t-copula to obtain a new grouped t-copula which describes more accurately the dependence among risk factors of...