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This paper finds out that the risk exposure of a trader subject to a VaR limit is always lower than that of an unconstrained trader and that the probability of extreme losses is also lower.
Persistent link: https://www.econbiz.de/10005843396
Hedge fund managers are subject to several non-linear incentives: (a) performance fee options (call); (b) equity investor's redemption options (put); (c) prime broker contracts allowing for forced deleverage (put). The interaction of these option-like incentives affects optimal leverage ex-ante,...
Persistent link: https://www.econbiz.de/10013093719
This paper studies a novel approach for managing macroeconomic volatility in commodity exporting countries. As part of this study, we develop a sovereign risk management model in the context of an Asset-Liability Management (ALM) framework. Our first contribution is an extension of the...
Persistent link: https://www.econbiz.de/10013004607
By inverting the optimal portfolios of mutual fund managers in a fairly general setting, which allows us to partial out the effect of risk aversion and hedging demands, we provide an estimate of perceived expected excess returns and show that they are significantly affected by experienced...
Persistent link: https://www.econbiz.de/10012850640
We investigate two alternative explanations why men may hold more stocks than women. Apart from a gender difference in risk aversion, gender differences in either optimism or in perceived risk of financial markets might cause men to hold more risky assets. Our results show that men tend to be...
Persistent link: https://www.econbiz.de/10013025768
Using close to 800,000 transactions by 66,000 households in the United States and close to 2,000,000 transactions by 303,000 households in Finland, this paper shows that individual investors with longer holding periods choose to hold less liquid stocks in their portfolios, consistent with Amihud...
Persistent link: https://www.econbiz.de/10012933926
Robinhood (RH) investors increased their holdings in the March 2020 COVID bear market, indicating an absence of collective panic and margin calls. This steadfastness was rewarded in the subsequent bull market. Despite unusual interests in some “experience” stocks (e.g., cannabis stocks),...
Persistent link: https://www.econbiz.de/10013235182
Hedge fund managers are subject to several non-linear incentives: (a) performance fee options (call); (b) equity investor's redemption options (put); (c) prime broker contracts allowing for forced deleverage (put). The interaction of these option-like incentives affects optimal leverage ex-ante,...
Persistent link: https://www.econbiz.de/10013035065
“Narrow framing” is a widely documented behavioral bias that predicts, instead of evaluating all their risk components as a whole, people often evaluate risks in isolation, separately from other risks they are already facing. Using representative survey data from the China Household Finance...
Persistent link: https://www.econbiz.de/10013246205
This paper studies a novel approach for managing macroeconomic volatility in developing countries based upon dynamic portfolio optimisation. As part of this study, we develop a sovereign risk management model in the context of an Asset-Liability Management (ALM) framework. First, we solve the...
Persistent link: https://www.econbiz.de/10012997399