Unlike standard derivatives instruments, correlation products contain nonseparable risk, meaning that the price sensitivity of one risk factor is a function of the level of another risk factor. This article outlines the pricing and hedging of one type of correlation product, the differential...

The present study is a comparative study between modern investment tools and old investment tools. The study has been conducted in Rajasthan (India) and therefore the old tools of investment available in Rajasthan have been identified and compared with the modern tools. The primary purpose of...

This paper co-authored by M. Nicolas J. Firzli and David Weeks looks at the notions of long-term asset allocation and the ‘quest for yields’ from the perspective of AUS, European and North American pension investors and board members (trustees), which where discussed at two recent global...

This paper introduces an alternate measure of idiosyncratic risk leveraged from the decomposition method to further eliminate the residual systematic risk inherent in the factor asset pricing model. Combining both complementary techniques contributes to a more comprehensive firm-level...

We show that internationally diversified portfolios carry sizeable political risk premia. We use a tail-risk portfolio selection model to obtain political efficient frontiers from skewed return distributions and manage political risk, and design an inference test to draw conclusions. We find...

Conventional risk management frameworks for investment portfolios rely on a set of mostly mathematical methodologies that make strong assumptions about the long term behavior of asset prices. These assumptions are based on the modern finance belief that there exists a long term, albeit...

Risk management is crucial for optimal portfolio management. One of the fastest growing areas in empirical finance is the expansion of financial deriva-tives. The purpose of this special issue on “Risk Management and Financial Deriva-tives” is to highlight some areas in which novel...

In this paper we formulate the Risk Management Control problem in the interest rate area as a constrained stochastic portfolio optimization problem. The utility that we use can be any continuous function and based on the viscosity theory, the unique solution of the problem is guaranteed. The...

This paper provides initial evidence on counterparty risk-mitigation activities of financial institutions on the basis of Depository Trust and Clearing Corporation's (DTCC) proprietary bilateral credit default swap transactions and positions. We show that financial institutions that are active...

Banks increasingly recognize the need to measure and manage the credit risk of their loans on a portfolio basis. We address the subportfolio "middle market". Due to their specific lending policy for this market segment it is an important task for banks to systematically identify regional and...