This chapter is an overview of a new kind of economics of the movies; it also is my attempt to lay a new foundation of the economics of art and culture. The essence of cultural goods is that they are creative goods that have no natural limit on their consumption or dissemination; they are...

In this article, the authors present a conceptual framework named 'Adaptive Seriational Risk Parity' (ASRP) to extend Hierarchical Risk Parity (HRP) as an asset allocation heuristic. The first step of HRP (quasi-diagonalization) determining the hierarchy of assets is required for the actual...

Actual portfolios contain fewer stocks than are implied by standard financial analysis that balances the costs of diversification against the benefits in terms of the standard deviation of the returns. Suppose a safety first investor cares about downside risk and recognizes the heavy tail...

Actual portfolios contain fewer stocks than are implied by standard financial analysis that balances the costs of diversification against the benefits in terms of the standard deviation of the returns. Suppose a safety first investor cares about downside risk and recognizes the heavytail feature...

We evaluate whether machine learning methods can better model excess portfolio returns compared to the standard regression-based strategies generally used in the finance and econometric literature. We examine 17 benchmark factor model specifications based on Expected Utility Theory and theory...

The finance literature looks at a number of factors to explain risk premia in corporate debt, such as liquidity effects, jump-to-default risk, and contagion risk. Stochastic re-covery rates as a source of systematic risk have not received much attention so far, most likely due to the...

This paper studies bivariate tail comovements on financial markets that are of crucial importance for the world economy: the S&P 500, US bonds, and currencies. We propose to study that form of dependence under the lens of cojump identification in a bivariate Brownian semimartingale with...

We introduce advanced idiosyncratic risk (“AI-Risk”), a parsimonious correlated residual correction to a predictive stress CAPM-like factor model, aimed to get more accurate stock-stock correlations. We find that AI-Risk can be significant for stock portfolios. Inclusion of AI-Risk gives a...

The effectiveness of the VIX index as a leading indicator of style returns has been examined in the finance literature, finding that increases in this “fear index” lead to outperformance of “value” vs “growth” stocks, although the effect has attenuated over time. This study...

Wrong way risk can be incorporated in Credit Value Adjustment (CVA) calculations in a reduced form model. Hull and White (2012) introduced a CVA model that captures wrong way risk by expressing the stochastic intensity of a counterparty's default time in terms of the financial institution's...