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Tranching, CDS and Asset Prices : How Financial Innovation Can Cause Bubbles and Crashes

Fostel, Ana; Geanakoplos, John - 2011

-2009. We study the effect of leverage, tranching, securitization and CDS on asset prices in a general equilibrium model with … collateral. We show why tranching and leverage tend to raise asset prices and why CDS tend to lower them. This may seem puzzling …, since it implies that creating a derivative tranche in the securitization whose payoffs are identical to the CDS will raise …

Persistent link: https://www.econbiz.de/10014180051

Coherent Measures of Risk from a General Equilibrium Perspective

Herings, Peter Jean-Jacques; Csóka, Péter; Kóczy, … - 2011

Coherent measures of risk defined by the axioms of monotonicity, subadditivity, positive homogeneity, and translation invariance are recent tools in risk management to assess the amount of risk agents are exposed to. If they also satisfy law invariance and comonotonic additivity, then we get a...

Persistent link: https://www.econbiz.de/10014181761

Sponsored Search and Market Efficiency

Dhar, Vasant; Ghose, Anindya - 2014

Sponsored search is the mechanism whereby where advertisers pay a fee to Internet search engines to be displayed alongside organic (non-sponsored) web search results. Based on prior literature, we draw an analogy between these markets and financial markets. We use the analogy as well as the key...

Persistent link: https://www.econbiz.de/10014044833

An Arbitrary Benchmark CAPM : One Additional Frontier Portfolio is Sufficient

Ekern, Steinar - 2008

The benchmark CAPM linearly relates the expected returns on an arbitrary asset, an arbitrary benchmark portfolio, and an arbitrary MV frontier portfolio. The benchmark is not required to be on the frontier and may be non-perfectly correlated with the frontier portfolio. The benchmark CAPM...

Persistent link: https://www.econbiz.de/10014047121

The Valuation of Structured Products Using Markov Chain Models

Madan, Dilip B.; Pistorius, Martijn; Schoutens, Wim - 2011

A Markov chain with an expanding non-uniform grid matching risk neutral marginal distributions is constructed. Conditional distributions of the chain are in the variance gamma class with prespecified skewness and excess kurtosis. Time change and space scale volatilities are calibrated from...

Persistent link: https://www.econbiz.de/10014197367

Capital Intensity and Investment Shocks : Implications for Stock Returns

Knesl, Jiri - 2019

I show that a firm's capital intensity affects the asset pricing implications of investment-specific technology shocks measured by a popular measure, the IMC porfolio. Capital-intensive stocks sorted by the exposure to this measure generate a highly significant average return premium of up to 5%...

Persistent link: https://www.econbiz.de/10014119859

Information in Financial Markets : Who Gets it First?

Swem, Nathan - 2017

I compare the timing of information acquisition among institutional investors and sell-side analysts, and I show that hedge fund trades predict the direction of subsequent analyst ratings change reports while other investors' trades do not. In addition, hedge funds reverse trades after analyst...

Persistent link: https://www.econbiz.de/10014122285

Environmental Information and Market Reactions to Environmental Legislation

Blacconiere, Walter G.; Northcut, W. Dana - 2014

Environmental issues have attracted national attention and are becoming a focus at many firms. This paper examines the relation between stock price reactions to the Superfund Amendments and Reauthorization Act (SARA) of 1986 and environmental data. We find some evidence that chemical firms with...

Persistent link: https://www.econbiz.de/10014122472

Resource Allocation in the Brain and the Capital Asset Pricing Model

Siddiqi, Hammad; Murphy, Austin - 2021

Using recent findings from brain sciences, we model the human brain as solving two optimization problems instead of one, which are (i) optimal resource allocation in the brain and (ii) mean-variance optimization. This changes the classical CAPM in only one way: an alpha appears which provides a...

Persistent link: https://www.econbiz.de/10013250948

Asset Allocation for “End-State” Portfolios

Teng, Michelle; Shen, Junying - 2021

In recent years many US corporate pension plans have closed and entered their “end-state.” As end-state plans have become more prevalent, their special portfolio management challenges, including asset allocation, have gained attention.Pure immunization with public fixed income assets...

Persistent link: https://www.econbiz.de/10013251275