The 1987 market crash was associated with a dramatic and permanent steepening of the implied volatility curve for equity index options, despite minimal changes in aggregate consumption. We explain these events within a general equilibrium framework in which expected endowment growth and economic...

This paper examines the performance of a naïve equally weighted buy-and-hold portfolio and optimization-based commodity futures portfolios for various lookback and holding periods using data from January 1986 to December 2018. The application of Monte Carlo simulation-based mean-variance and...

We develop a conditional capital asset pricing model in continuous-time that allows for stochastic beta exposure. When beta co-moves with market variance and the stochastic discount factor (SDF), beta risk is priced, and the expected return on a stock deviates from the security market line. The...

This paper derives a robust online equity trading algorithm that achieves the greatest possible percentage of the final wealth of the best pairs rebalancing rule in hindsight. A pairs rebalancing rule chooses some pair of stocks in the market and then perpetually executes rebalancing trades so...

The use of futures exchange contracts instead of forwards completes the maturity spectrum of the correlation between the spot yield and the premium. We find that the forward premium puzzle (FFP) depends significantly on the maturity horizon of the futures contract and the choice of sampling...

We study the pricing of contracts in fixed income markets in the presence of volatility uncertainty. We consider an arbitrage-free bond market under volatility uncertainty. The uncertainty about the volatility is modeled by a G-Brownian motion, which drives the forward rate dynamics. The absence...

Risk-neutral valuation is used to value a portfolio and decompose it into the components accruing to its stakeholders. The analysis incorporates managers' expected performance and contract renewal issues. A managed portfolio's economic value is shown to differ from its net asset value. A better...

This paper proposes a framework that decomposes the market risk into three components: upside, downside, and tail risk. Their risk premiums can be estimated using information from either the index options market or the stock market. The estimated premiums from both markets share two important...

The performance of dynamic trading and investment strategies can be difficult to predict. Although not without its problems, analysis of the historical performance of a strategy can provide valuable insight into its general risk and return properties. Furthermore, historical analysis allows one...

We find that realized skewness is a significant indicator of returns across a range of assets from different asset classes, namely commodities, government bonds, equity indices and currencies. Taking on skewness risk is broadly compensated within, but more substantially across asset classes....