We consider a large trader liquidating a portfolio using a transparent trading venue with price impact and a dark pool with execution uncertainty. The optimal execution strategy uses both venues continuously, with dark pool orders over-/underrepresenting the portfolio size depending on adverse...

Structured investment products, also known as equity- or index-linked notes, have become immensely popular among retail investors in the last ten years. In this paper, however, we show that for classical rational investors the utility gains from structured products are typically much smaller...

Despite much work on hedging in incomplete markets, the literature still lacks tractable dynamic hedges in plausible environments. In this article, we provide a simple solution to this problem in a general incomplete-market economy in which a hedger, guided by the traditional minimum-variance...

We present a dynamic model of venture capital financing, described as a sequential investment problem with uncertain outcome. Each venture has to pass a sequence of milestones, and there is a chance of terminal failure in each milestone. The investors decide sequentially about the speed of the...

A lockup period for hedge funds restricts a multi-period investor's ability to rebalance his portfolio and has non-trivial effects on the allocation decision and portfolio efficiency. Investors compensate for a hedge fund lockup period by making adjustments to their equity and bond holdings....

We use forward-looking information from option prices to estimate option-implied correlations and to construct an option-implied predictor of factor betas. With our implied market betas, we find a monotonically increasing risk-return relation, not detectable with standard rolling-window betas,...

Recent research on unspanned stochastic variance raises the possibility that interest rate derivatives constitute an important component of optimal fixed income portfolios. In this paper, I estimate a flexible dynamic term structure model that allows for unspanned stochastic variance on an...

This paper investigates the empirical relation between spot and forward implied volatility in foreign exchange. We formulate and test the forward volatility unbiasedness hypothesis, which is the volatility analogue to the extensively researched hypothesis of unbiasedness in forward exchange...

This paper proposes a portfolio choice model in which investors are subject to liquidation risk and face higher costs in the event of joint liquidation (as was observed during the crisis of 2008-2009). The risk of joint liquidation creates an incentive for investors to choose heterogenous...

We develop a model of portfolio choice capable of nesting the views of Keynes, advocating concentration in a few familiar assets, and Markowitz, advocating diversification across all available assets. In the model, the return distributions of risky assets are ambiguous, and investors are averse...