The current financial crisis has strongly affected the financial status (expressed by the funding ratio) of the pension funds and their ability to grant full indexation of the liabilities to inflation rate. The indexation benefits represent a priority for a participant of a pension fund bearing...

As hedge fund replication based on factor models has encountered growing interest among professionals and academics, and despite the launch of numerous products (indexes and mutual funds) in the past year, it has faced many critics. In this paper, we consider two of the main critiques, namely...

Market liquidity is complex to measure empirically. This explains why there is no consensus about performance ratios adjusted to its risk. We summarize market liquidity by two major characteristics: a costly one because of the loss of the illiquidity premium; and a profitable one when investors...

It has become almost conventional wisdom that investors should avoid funds with high expense ratios. Like many nuggets of conventional wisdom, there is some truth, but many exceptions: some of the best funds come at the price of higher expense ratios. Financial planners need this type of...

Historically, the practice of trustees of defined benefit programs has been to make the asset allocation decision based on prevailing risk-return relationship for asset classes without regard to the plan’s economic funded ratio, liability structure, and liability economic growth rate. Once the...

The recent financial crisis highlighted the dangers of systemic risk. In this regard no common view appears to exist on the definition, measurement, and real impact of systemic risk on the financial system. This paper aims to analyze the relationship between systemic risk and portfolio...

The new Basel III rules for liquidity and funding will have an impact on several areas of the banking business. As a consequence, it is useful to identify the key areas within a bank where Basel III has the biggest impact and to define the necessary strategies, processes, and new products to...

Traditional risk management of hedge funds is often complicated by their lack of transparency. Consequently, plan sponsors traditionally rely on returns analysis to manage the risk of a portfolio of hedge funds. Such an approach involves some obvious difficulties, for example, returns data is...

Starting in September 2008 stock market regulators across the world introduced, at different times and for different durations, bans on short-selling financial institution’s shares. The argument for the bans is that short selling increases the volatility and contagion risk of financial...

The link between investor sentiment and asset valuation is at the center of a long-running debate in behavioral finance. Using a new composite sentiment indicator, we show that the conventional risk does not explain the abnormal returns of portfolios most sensitive to the sentiment factor. Our...