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A Model for the Valuation of Assets with Liquidity Risk

Nauta, Bert-Jan - 2016

This paper describes a model for the valuation of assets on a bank balance sheet with liquidity risk. The new feature of this model is that it explicitly incorporates the funding term of an asset. The inclusion of the funding term is important since it determines the expected liquidation loss....

Persistent link: https://www.econbiz.de/10013003042

Internal Valuation of Assets with Liquidity Risk

Nauta, Bert-Jan - 2019

The inclusion of funding costs in the valuation of derivatives resulting in the so-called funding valuation adjustment (FVA) is a topic of intense debate, model development, and research. One issue with standard formulations of FVA is that it is the same for liquid and illiquid assets. Even if...

Persistent link: https://www.econbiz.de/10012905080

Expected Equity Returns Should Correlate with Idiosyncratic Risk

Bruno, Giovanni - 2018

law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory … equity than for assets, and stronger for more levered firms — consistent with the theory. We test also the timeseries … implications of the theory. Time variation in asset ivol causes time variation in the option value of equity that translates into …

Persistent link: https://www.econbiz.de/10012910108

Construction, Systematic Risk, and Stock-Level Investment Anomalies

Aretz, Kevin; Kagkadis, Anastasios - 2021

shocks, we demonstrate that our evidence is consistent with neoclassical finance theory …

Persistent link: https://www.econbiz.de/10013239312

Active Portfolio Management, Positive Jensen-Jarrow Alpha, and Zero Sets of CAPM

Charles-Cadogan, G. - 2011

We present conditions under which positive alpha exists in the realm of active portfolio management - in contrast to the controversial result in (Jarrow (2010) which implicates delegated portfolio management by surmising that positive alphas are illusionary. Specifically, we show that the...

Persistent link: https://www.econbiz.de/10013117245

A Long Run Risks Model of Asset Pricing with Fat Tails

Wang, Zhiguang - 2011

We explore the effects of fat tails on the equilibrium implications of the long run risks model of asset pricing by introducing innovations with dampened power law to consumption and dividends growth processes. We estimate the structural parameters of the proposed model by maximum likelihood. We...

Persistent link: https://www.econbiz.de/10013122690

Beta Risk in the Cross-Section of Equities

Boloor, Ali - 2019

We develop a continuous-time intertemporal CAPM model that allows for risky beta exposure, which we explicitly specify. In the model, the expected return on a stock depends on beta's co-movement with market variance and more generally with the stochastic discount factor and deviates from the...

Persistent link: https://www.econbiz.de/10012899147

Factor Investing, Learning from Prices, and Endogenous Uncertainty in Asset Markets

Dim, Chukwuma; Sangiorgi, Francesco; Vilkov, Grigory - 2021

We study learning and uncertainty under the factor investing paradigm using an endogenous information model with correlated assets. As investors shift attention from firms towards systematic risk factors, stock prices become less informative, increasing systematic uncertainty and incentivizing...

Persistent link: https://www.econbiz.de/10013247042

Heterogeneity of investors and asset pricing in a risk-value world

Franke, Günter; Weber, Martin - 2001

Persistent link: https://www.econbiz.de/10001635448

Explaining asset pricing puzzles associated with the 1987 market crash

Benzoni, Luca; Collin-Dufresne, Pierre; Goldstein, Robert S. - 2010

The 1987 market crash was associated with a dramatic and permanent steepening of the implied volatility curve for equity index options, despite minimal changes in aggregate consumption. We explain these events within a general equilibrium framework in which expected endowment growth and economic...

Persistent link: https://www.econbiz.de/10008699179