Supported by empirical examples, this paper provides a theoretical analysis on the impacts of using a suboptimal information set for the estimation of the empirical pricing kernel and, more in general, for the validity of the fundamental theorems of asset pricing. While inferring the...

I develop a noisy rational expectations equilibrium model with a continuum of states and a full set of options that render the market complete. I show a major difference in equilibrium behaviour between models with constant absolute risk aversion (CARA) and non-CARA preferences. First, when...

The area of derivatives is arguably the most fascinating area within financial economics during the past thirty years. This chapter reviews the evolution of derivatives contract markets and derivatives research over the past thirty years. The chapter has six complementary sections. The first...

The paper concerns an issue of existence of a risk premium in equity and index futures markets. The paper consists of four parts. The first part describes the basic hypotheses of forward curves in the futures market. In the second section, I formulate 5 hypotheses concerning a risk premium in...

This article aims to extend evaluation of the classic multifactor model of Carhart (1997) for the case of global equity indices and to expand analysis performed in Sakowski et. al. (2015). Our intention is to test several modifications of these models to take into account different dynamics of...

Using copula methods and simulation-based inference, the authors investigate the association between the performance of a stock index formed by European financial institutions and a basket of CDS contracts of the same sector. Their analysis focuses on (i) assessing the dependence structure of...

Three concepts: stochastic discount factors, multi-beta pricing and mean-variance efficiency, are at the core of modern empirical asset pricing. This chapter reviews these paradigms and the relations among them, concentrating on conditional asset-pricing models where lagged variables serve as...

This chapter provides a perspective on the rapidly developing literature on investment performance evaluation. I use the stochastic discount factor approach to present and critique current performance measurement techniques in a unified setting. I offer a number of suggestions to improve...