Although portfolio management didn’t change much during the 40 years after the seminal works of Markowitz and Sharpe, the development of risk budgeting techniques marked an important milestone in the deepening of the relationship between risk and asset management. Risk parity then became a...

Basel III classifies government debt as risk free while actual interest rates in the European Union (EU) show large differences not only because of liquidity but mainly because of the risk of default, as also reflected in credit default swaps. Curiously such debt defaults may not happen so that...

Results in this paper support evidence of time-varying beta coefficients for five sectors in Kuwait Stock Market. The paper indicates banks, food, and service sectors exhibit relatively wider range of variation compared to industry and real estate sectors. Results of time-varying betas...

We study the pricing of political uncertainty in a general equilibrium model of government policy choice. We find that political uncertainty commands a risk premium whose magnitude is larger in poorer economic conditions. Political uncertainty reduces the value of the implicit put protection...

Dynamic correlation models demonstrate that the relationship between interest rates and housing prices is non-constant. Estimates reveal statistically significant time fluctuations in correlations between housing price indexes and Treasury bonds, the S&P 500 Index, and stock prices of...

We develop a simple overlapping generations model in which the young have a choice in investing in equities and index-linked bonds. Projections of share price uncertainty over a 30-year period show that the risk associated with such a long-term investment predicts an equity premium that matches...

In the years following the influential article of Poole (1970), many central banks reoriented their operating procedures to focus more on interest rates and less on monetary aggregates. The rapid restructuring of global financial markets was thought to have led to instability in standard...

We argue that emerging economies borrow short term due to the high risk premium charged by bondholders on long-term debt. First, we present a model where the debt maturity structure is the outcome of a risk sharing problem between the government and bondholders. By issuing long-term debt, the...