This paper demonstrates that aggregate losses are necessarily low as long as we remain under the standard assumptions of LDA models. Moreover empirical findings show that the correlation between two aggregate losses is typically below 5%, which opens a wide scope for large diversification...

We consider a two-country economy under the nonarbitrage assumption and where volatilities are stochastic. Assuming the existence of state variables, we show that, under some mild volatility assumptions, the model is actually fully specified. In particular, both term structure dynamics and the...

Most models of the term structure show a factor structure, where interest rates depend linearly on some factors. We derive in a Heath, Jarrow and Morton [1992] type framework what the main consequences of this assumption are, especially when volatilities are stochastic. We show that such a...

[fre] Cet article examine les différentes règles proposées pour fixer les taux de conversion au 1er janvier 1999. Ces règles ne sont pas toutes équivalentes au regard de l'influence qu'elles peuvent avoir sur les marchés financiers. Idéalement, une règle de conversion doit être telle...

[eng] A Return to Average Rates in the European Exchange Rate Mechanism: 1987-1995 by Jean Sébastien Pentecôte and Thierry Roncalli . This paper studies the effect of the return to average daily rates for the European Exchange Rate Mechanism currencies and the dollar against the deutschemark...

Although portfolio management didn’t change much during the 40 years after the seminal works of Markowitz and Sharpe, the development of risk budgeting techniques marked an important milestone in the deepening of the relationship between risk and asset management. Risk parity then became a...

The ongoing economic crisis has profoundly changed the industry of the asset management, by putting risk management at the heart of most investment processes. This new risk-based investment style does not rely on returns forecasts and is therefore assumed to be more robust. In 2011, it has...