A random variable dominates another random variable with respect to the covariance order if the covariance of any two monotone increasing functions of this variable is smaller. We characterize completely the covariance order, give strong sufficient conditions for it, present a number of examples...

We propose a novel no-arbitrage framework, which exploits convex asset pricing constraints to study investors’ marginal utility of wealth or, more generally, Stochastic Discount Factors (SDFs). We establish a duality between minimum dispersion SDFs and penalized portfolio selection problems,...

We provide a model-free framework to study the global factor structure of exchange rates. To this end, we propose a new methodology to estimate international stochastic discount factors (SDFs) that jointly price cross-sections of international assets, such as stocks, bonds, and currencies, in...

We provide a theoretical framework to uncover in a model-free way the relationship between international stochastic discount factors (SDFs), stochastic wedges, and financial market structures. Exchange rates are in general different from the ratio of international SDFs in incomplete markets, as...