This paper proposes a two factor model for asset pricing. We formulate a model of asset returns that in addition to the traditional market return term includes also the square of the market return to account for risk originating from coskewness with the market portofolio. The quadratic term is...

This paper studies the problem of disentangling risk correlation and contagion in a set of individual binary processes. The two admissible values correspond to bad and good risk states of an individual. The risk correlation is captured by introducing a dynamic frailty, whereas the contagion...

The recursive prediction and filtering formulas of the Kalman filter are difficult to implement in nonlinear state space models since they require the updating of a function. The aim of this paper is to consider the situation of a large number n of individual measurements, called...

There is a growing literature on the possibility to identify correlation and contagion in qualitative risk analysis. Our paper considers this question by means of a model describing the joint dynamics of a set of individual binary processes. The two admissible values correspond to bad and good...

We consider a homogeneous class of assets, whose returns are driven by an unobservable factor representing systematic risk. We derive approximated pricing formulas for the future factor values and their proxies, when the size n of the class is large. Up to order 1/n, these closed-form...

In this paper we examine the dependence between the liquidation risks of individual hedge funds. This dependence can result either from common exogenous shocks (shared frailty), or from contagion phenomena, which occur when an endogenous behaviour of a fund manager impacts the Net Asset Values...

We consider a set of Markovian processes with Stochastic transition matrices. This specification extends the standard stochastic intensity model introduced by Cox in the two state case. Such a model is appropriate for the joint analysis of rating histories of several corporates, including the...

In this paper we consider an incomplete market framework and explain how to use jointly observed prices of the underlying asset and some derivatives written on this asset for an efficient pricing of other derivatives. This question involves two types of moment restrictions, which can be written...