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Sparse and stable international portfolio optimization and currency risk management

Burkhardt, Raphael; Ulrych, Urban - 2022 - This Version: January 2022

This paper introduces a sparse and stable optimization approach for a multi-currency asset allocation problem. We study the benefits of joint optimization of assets and currencies as opposed to the standard industry practice of managing currency risk via so-called currency overlay strategies. In...

Persistent link: https://www.econbiz.de/10012800968

Dynamic currency hedging with ambiguity

Polak, Pawel; Ulrych, Urban - 2021 - This version: August 2021

Persistent link: https://www.econbiz.de/10012614590

Discriminatory pricing of over-the-counter derivatives

Hau, Harald; Hoffmann, Peter; Langfield, Sam; Timmer, … - 2017

For the first time, new regulatory data allow precise measurement of price discrimination against non-financial clients in the FX derivatives market. Consistent with the theoretical literature, transaction costs vary systematically with measures of client sophistication. The median client pays...

Persistent link: https://www.econbiz.de/10011875673

Pricing and hedging of inflation-indexed bonds in an affine framework

Eksi, Zehra; Filipović, Damir - 2013

This study deals with the pricing and hedging of inflation-indexed bonds. Under foreign exchange analogy we model the … for the factor process. Then, we perform a novel hedging analysis where our objective is to replicate an indexed bond of a … given maturity by trading a portfolio of nominal bonds. This analysis leads to a hedging criterion based on a set of …

Persistent link: https://www.econbiz.de/10010257509

Hedging under an expected loss constraint with small transaction costs

Bouchard, Bruno; Moreau, Ludovic; Soner, Halil Mete - 2014

We consider the problem of option hedging in a market with proportional transaction costs. Since super-replication is … very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small …

Persistent link: https://www.econbiz.de/10010442924

CDS and credit: the effect of the bangs on credit insurance, lending and hedging

Gündüz, Yalın; Ongena, Steven; Tümer-Alkan, Günseli; … - 2023 - This draft: October 31, 2023

Persistent link: https://www.econbiz.de/10014483049

The role of signal precision and transaction costs in stock, option and volatility trading

Gençay, Ramazan; Gibson, Rajna; Xue, Yi - 2009

In this study, we examine the rationale that informed traders use in choosing various financial instruments in order to speculate on the volatility of the underlying asset, here a common stock. Using a continuous-time trading model, we demonstrate that the quality of the private information...

Persistent link: https://www.econbiz.de/10003970302

Optimal liquidation strategies in illiquid markets

Jondeau, Eric; Perilla, Augusto; Rockinger, Michael - 2009

In this paper, we consider block trading strategies and characterize the times when a block trade is a popular choice. We also study the economic relevance of optimal liquidation strategies by calibrating a recent and realistic microstructure model with data from the Paris Stock Exchange. We...

Persistent link: https://www.econbiz.de/10003970463

Reverse engineering financial markets with majority and minority games using genetic algorithms

Wiesinger, Judith; Sornette, Didier; Satinover, Jeffrey - 2010

Using virtual stock markets with artificial interacting software investors, aka agent-based models (ABMs), we present a method to reverse engineer real-world financial time series. We model financial markets as made of a large number of interacting boundedly rational agents. By optimizing the...

Persistent link: https://www.econbiz.de/10003973139

Response speeds of direct and securitized real estate to shocks in the fundamentals

Oikarinen, Elias; Hoesli, Martin; Serrano, Camilo - 2010

We use sector level REIT and transaction-based direct real estate data for the U.S. to provide a clearer understanding of the dynamic relations between public and private real estate returns. We exclude leverage from REIT returns to make the REIT data more comparable with the direct market data....

Persistent link: https://www.econbiz.de/10008797757