The author's study analyzes, loan valuation methods using discrete time model of contingent claims analysis. In the empirical test, the undiversifiable risk was measured by the correlation coefficient of one borrower with the average return of all borrowers. The results of the test supported the...

Pension funds are increasingly relying on swaps to hedge the long-term nature of their liabilities. While the use of swaps reduces pension funds' exposure to interest rate risk, it exposes pension funds to liquidity risk because of potential margin calls. We study these effects using unique data...

This paper studies long-run trends in the expected return on risky assets and its relationship with the safe rate. We use time-varying return predictability regressions to estimate expected returns on two major risky asset classes – equity and housing – across 17 countries and 145 years. We...

Investors with heterogeneous trading horizons require compensation for the exposure to different risks. The no-arbitrage valuation over increasing horizons is described by the evolution of stochastic discount factors (SDFs). Each of them exhibits a multiplicative decomposition into deterministic...

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...

Empirically testing a bond portfolio hedging model is usually carried out when proposing a new model or to compare several existing models using real data. However, there are many methodological choices to be made during such exercise, which are usually made either implicitly or without...

There are concerns that climate-related physical and political risks are not yet properly reflected in asset prices. To address these concerns, we develop a dynamic asset pricing framework with two sources of rare disasters: macroeconomic events and climate change. We link carbon emissions and...

This paper investigates whether multivariate crash risk is priced in the cross- section of expected stock returns. Motivated by a theoretical asset pricing model, we capture the multivariate crash risk of a stock by a combined measure based on its expected shortfall and its multivariate lower...

This paper compares several investment strategies designed to exploit the low-beta anomaly. Although the notion of buying low-beta stocks and selling high-beta stocks is natural, a choice is necessary with respect to the relative weighting of high-beta stocks and low-beta stocks in the...

Thinly traded securities exist in both emerging and well developed markets. However, plausible estimations of market risk measures for portfolios with infrequently traded securities have not been explored in the literature. We propose a methodology to calculate market risk measures based on the...