In the first three decades of CRSP data, value stocks have higher betas than growth stocks.Later on, the ranking is reversed and the gap in beta widens. What makes growth strategiesnowadays bear more market risk than value strategies? What are the causes of the reversalin the ranking of betas?...

This paper introduces a time-inhomogeneous parameterization of the forward LIBOR volatilities and analyzes its implications for the valuation of Bermudan swaptions. The model approximates the actual term structure of volatilities with a curve from a given set defined by the parametric...

This paper addresses the issue of intergenerational and internationalsharing of longevity and growth risks. Current research on worldwidedemographic changes highlights the importance of longevity risk on financialmarkets and the need to devise optimal hedging vehicles. We present a...

This paper develops a dynamic trade-off model of optimal capital structure that takes intoaccount the fact that most firms have both invested assets and growth opportunities. Thesetwo sources of value react quite differently to business cycle risk. In particular, growth optionsare more sensitive...

In June 2003 Swiss banks held over CHF 500 billion in mortgages. This important segment accounts for about 63% of all loan portfolios of Swiss banks. Since default insurance is not common in Switzerland, the corresponding risks are a severe threat for the health of the financial system. We...