This paper studies the role of investors' optimism about future economic growth in their investment decisions. Based on simple intuition, we argue that investors base their future investment decisions not only on asset-specific information, but also on their expectations about future economic...

This paper proposes a new discount rate that pension funds can use to discount their future obligations. If the payouts of a pension fund depend on the return of the fund's assets, then neither the risk-free rate nor the expected return is an equitable way to discount future liabilities. Using...

The derivation of the bi-variate Payoff Distribution model by Kat and Palaro (2005) represents an interesting contribution to the performance evaluation and asset pricing literature. Nonetheless, their approach for evaluating the function is significantly flawed. Recently, Papageorgiou et al....

This paper evaluates the model risk of models used for forecasting systemic and market risk. Model risk, which is the potential for different models to provide inconsistent outcomes, is shown to be increasing with market uncertainty. During calm periods, the underlying risk forecast models...

Historical VaR, CVaR and ES (Expected Shortfall) to LIQUIDATION Software is a model characterized by its straightforwardness, allowing regulators measure risk using a standard database of primitive factors and portfolio positions only, leaving little error margin in comparing market risk for...

This paper contains facts and introductory concepts on Asset and Liability Management, Funds Transfer Pricing Systems and Funding Costs. Banks, hedge funds and more generally finance companies engage in complex capital market activities that involve trading of instruments in derivative or cash...

Academics and regulators posit that mutual funds that engage in significant liquidity transformation can be systemically risky because investors in these funds redeem at the fund's net-asset-value and compete for a common fund liquidity pool. An alternative, more general explanation is that all...

The objective of the study is to analysis portfolio returns and the performance of asset pricing models in the context of macroeconomic variables. Portfolios have been constructed on the basis of firms' size; two equally weighted decile portfolios and two value weighed decile portfolios...

Banks lend more to banks that are similar to them. Using data from the German credit register and proprietary supervisory data on the quality of banks’ loan portfolio, we show that a similar portfolio of the lending and borrowing bank helps to overcome information asymmetries in interbank...

Contrary to the theoretical principle that higher risk is compensated with higher expected return, the literature shows that low-risk stocks outperform high-risk stocks. Using a large-scale household dataset, we provide an explanation for this puzzling result that the anomalous negative...