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Risk Arbitrage Opportunities for Stock Index Options

Post, Thierry - 2019

developed which completely characterizes all risk arbitrage opportunities which arise if a well-behaved pricing kernel does not … exist. The Stochastic Arbitrage system can account for market imperfections in the form of transactions costs and general … portfolio restrictions. An active trading strategy based on the Stochastic Arbitrage system for front-month S&P500 stock index …

Persistent link: https://www.econbiz.de/10012899380

A Dual Characterisation of Regulatory Arbitrage for Coherent Risk Measures

Herdegen, Martin - 2020

portfolios exist. We call this situation regulatory arbitrage, and prove that it cannot be excluded – unless ρ is as conservative … measures, and give a necessary and sufficient characterization for regulatory arbitrage. We show that the presence or absence … of regulatory arbitrage for ρ is intimately linked to the interplay between the set of equivalent martingale measures …

Persistent link: https://www.econbiz.de/10012823360

Ordering ambiguous acts

Jewitt, Ian; Mukerji, Sujoy - 2017

We investigate what it means for one act to be more ambiguous than another. The question is evidently analogous to asking what makes one prospect riskier than another, but beliefs are neither objective nor representable by a unique probability. Our starting point is an abstract class of...

Persistent link: https://www.econbiz.de/10011694759

Belief-neutral efficiency in financial markets

Beißner, Patrick; Riedel, Frank - 2025

Heterogeneous beliefs among market participants can lead to questionable speculative trading that goes beyond any risk-sharing motives. We demonstrate that such unwarranted betting behavior in market equilibrium can be mitigated by introducing nonlinear pricing for ambiguous contracts, without...

Persistent link: https://www.econbiz.de/10015272951

Uncertain Risk Parity

Shah, Anish - 2020

Risk parity is a portfolio construction technique that scales sections of a portfolio—e.g., stocks, bonds, currencies, commodities—so that forecasted contributions to net portfolio risk match the budget. Because risks are measured from a point-estimate of covariance, the method is subject to...

Persistent link: https://www.econbiz.de/10012848884

Saving Markowitz : A Risk Parity Approach Based on the Cauchy Interlacing Theorem

Fernandes, Fernando - 2020

It is well known that Markowitz Portfolio Optimization often leads to unreasonable and unbalanced portfolios that are optimal in-sample but perform very poorly out-of-sample. There is a strong relationship between these poor returns and the fact that covariance matrices that are used within the...

Persistent link: https://www.econbiz.de/10012828065

Regime Dependent Optimization across Various Risk Measures for Asia-Pacific Markets for a Diversifying Portfolios

Kumar, Saurav - 2020

The aim of this paper is to examine the diversification capability of energy commodities in a portfolio comprising the stock market index, crude oil and natural gas in the Asia-Pacific region. In a first step, we identify the impact of market disturbances on the selected sample period on the...

Persistent link: https://www.econbiz.de/10012829144

Financial Engineering : A Flexible Longevity Bond to Manage Individual Longevity Risk

Zhou, Yuxin - 2020

There is a significant potential demand in many countries around the world for a flexible product to manage individual longevity risk arising from the prevalence of defined contribution pensions, uncertainty in improvements in life expectancy, potential reductions in public pensions and a lack...

Persistent link: https://www.econbiz.de/10012836433

Portfolio Choice with Market-Credit Risk Dependencies

Bo, Lijun - 2018

We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale approach and analyze the recursive system of nonlinear...

Persistent link: https://www.econbiz.de/10012916549

The Value-Drivers of Risk Parity and its Component Portfolios

Alkafri, Nabil - 2019

The aim of this paper is to provide more transparency regarding risk parity portfolios. We design a structural framework to properly describe, evaluate, and improve the performance characteristics of risk parity portfolios. This is achieved by segregating the input parameter for the risk parity...

Persistent link: https://www.econbiz.de/10012862956