According to no-arbitrage, risk-adjusted returns should be unpredictable. Using several prominent factor models and a large cross-section of anomalies, we find that past pricing errors predict future risk-adjusted anomaly returns. We show that past pricing errors can be interpreted as deviations...

Multivariate GARCH models do not perform well in large dimensions due to the so-called curse of dimensionality. The recent DCC-NL model of Engle et al. (2019) is able to overcome this curse via nonlinear shrinkage estimation of the unconditional correlation matrix. In this paper, we show how...

Multivariate GARCH models do not perform well in large dimensions due to the so-called curse of dimensionality. The recent DCC-NL model of Engle et al. (2019) is able to overcome this curse via nonlinear shrinkage estimation of the unconditional correlation matrix. In this paper, we show how...

In this paper we propose a new pricing methodology for European multi-asset options based on the family of normal mean-variance mixture copulas. The goal is to develop a copula-based method with the flexibility to reproduce the correlation skew, and at the same time efficient enough to be used...

Modeling and forecasting dynamic (or time-varying) covariance matrices has many important applications in finance, such as Markowitz portfolio selection. A popular tool to this end are multivariate GARCH models. Historically, such models did not perform well in large dimensions due to the...