This article aims to extend evaluation of the classic multifactor model of Carhart (1997) for the case of global equity indices and to expand analysis performed in Sakowski et. al. (2015). Our intention is to test several modifications of these models to take into account different dynamics of...

A small but ambitious literature uses affine arbitrage-free models to estimate jointly U.S. Treasury term premiums and the term structure of equity risk premiums. Within this approach, this paper identifies the parameter restrictions that are consistent with a simple dividend discount model,...

Significant variation in the terms and volume of lending across classes of borrowers distinguished only by qualities independent of credit risk is often interpreted as evidence of inefficient or inequitable discrimination in credit markets. Increasing accuracy in the measure of credit risk...

The use of futures exchange contracts instead of forwards completes the maturity spectrum of the correlation between the spot yield and the premium. We find that the forward premium puzzle (FFP) depends significantly on the maturity horizon of the futures contract and the choice of sampling...

We identify a global risk factor in the cross-section of implied volatility returns in currency markets. A zero-cost strategy that buys forward volatility agreements with downward sloping implied volatility curves and sells those with upward slopes - volatility carry strategy - generates...

Prior research uses the basic one-period European call-option pricing model to compute default measures for individual firms and concludes that both the size and book-to-market effects are related to default risk. For example, small firms earn higher return than big firms only if they have...

This paper discusses a class of methodological issues that frequently arise in the risk management systems such as PFE and CVA engines. Simplified methodology and shortcuts come at a price, sometimes a steep one. To account for model deficiencies and disconnect between the calibration and the...

Despite the arguments that can be made against using the CAPM, it is very widely used in regulation. In particular, it is relied upon in setting utility prices in each of Australia, New Zealand and the United Kingdom, and also features in this context in Germany. In addition, UK competition...

In what follows we quote the Hull-White 1 factor and Ho-Lee model dynamics and their corresponding Eurodollar convexity adjustment formulas. We then show that, in the special case where the Hull-White mean reversion parameter is zero, the adjustment under the Hull-White and Ho-Lee models is...

This paper suggests an alternative explanation for the recently documented betting against beta anomaly. Given that the equity of a levered firm is equivalent to a call option on firm assets and option returns are non-linearly related to underlying stock returns, linear CAPM-type regressions are...