Heterogeneous-agents asset pricing theories imply that stockholders' consumption has the first-order effect on equity premium. Motivated by these theories, we evaluate the performance of the conditional CCAPM in explaining time-variation in market returns and cross-sectional variation in...

A dynamic copula model is introduced, in which the copula structure is inferred from the realized covariance matrix estimated from within-day high-frequency data. The estimation is carried out in a method-of-moments fashion using Hoeffding's lemma. Applying this procedure day by day gives rise...

Tail risk refers to the possibility that a rare event would adversely affect the value of a portfolio in a significant manner. It became much more relevant due to recent periods of strong market turbulence.We describe how to quantify such risk, which tail risk protection strategies were...

This presentation reconsiders Knight's Risk, Uncertainty, and Profit of 1921 in light of the emergence of the World Wide Web in early-1990s, Emanuel Derman's pioneering work in Model Risk Management at Goldman Sachs in mid-1990s, backlash against quantitative models in aftermath of the Global...

We investigate the dynamics of the relationship between returns and extreme downside risk in different states of the market by combining the framework of Bali, Demirtas, and Levy (2009) with a Markov switching mechanism. We show that the risk-return relationship identified by Bali, Demirtas, and...

Investors show different behaviour in falling markets and in rising markets. This paper demonstrates that the beta of individual stocks varies across the entire return distribution and that the variation depends on the frequency of the returns. While there is a symmetric u-shape increase for...

Risk assessments often encounter extreme settings with very few or no occurrences in reality. Inferences about risk indicators in such settings face the problem of insufficient data. Extreme value theory is particularly well suited for handling this type of problems. This paper uses a...

We forecast portfolio risk for managing dynamic tail risk protection strategies, based on extreme value theory, expectile regression, Copula-GARCH and dynamic GAS models. Utilizing a loss function that overcomes the lack of elicitability for Expected Shortfall, we propose a novel Expected...

The availability of high frequency financial data has generated a series of estimators based on intra-day data, improving the quality of large areas of financial econometrics. However, estimating the standard error of these estimators is often challenging. The root of the problem is that...