We generalize the idea of semi-self-financing strategies, originally discussed in Ehrbar, Journal of Economic Theory (1990), and later formalized in em Cui et al, Mathematical Finance 22 (2012), for the pre-commitment mean-variance (MV) optimal portfolio allocation problem. The proposed...

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...

We present efficient partial differential equation (PDE) methods for continuous time mean-variance portfolio allocation problems when the underlying risky asset follows a jump-diffusion. The standard formulation of mean-variance optimal portfolio allocation problems, where the total wealth is...

A numerical technique based on the embedding technique proposed in [21, 33] for dynamic mean-variance (MV) optimization problems may yield spurious points, i.e. points which are not on the efficient frontier. In [27], it is shown that spurious points can be eliminated by examining the left upper...

Keeping in view that the roles of portfolio risk and the relationship between different risky lending assets in loan valuation have not been studied empirically, this study examines the relationship between undiversiable portfolio risk and portfolio lending with an attempt to fill the gap...

We study the economic sources of stock-bond return comovement and its time variation using a dynamic factor model. We identify the economic factors employing structural and non-structural vector autoregressive models for economic state variables such as interest rates, (expected) inflation,...

If the firm chooses the stock of capital, labor, cash (distributions) so as to maximize its expected discounted present value, its investment policy should adjust endogenously to changes in investor preferences. It is hypothesized that quantitative easing (QE) affects asset prices through a...

This paper presents an equilibrium model in a pure exchange economy when investors have three possible sources of heterogeneity. Investors may differ in their beliefs, in their level of risk aversion and in their time preference rate. We study the impact of investors heterogeneity on the...

Using market prices of inflation-linked bonds and nominal bonds issued by the French Treasury, both the real and nominal zero coupon curves are estimated from January 1, 2013 to December 31, 2015. Several methods are applied to extract zero coupon bond prices: bootstrapping, a piecewise constant...

Procyclical assets tend to rise in value when the economy is expanding and fall with the advent of a recession. Countercyclical assets are instead negatively correlated with the state of the economy. Despite the use of optimization methods, hedging, and ad hoc rebalancing techniques most...