This paper studies the effects of the U.S. rising earnings inequality between the late 1960s and the mid 1990s on the portfolio allocation and prices of assets. In order to investigate the link, a life-cycle general equilibrium model is constructed where distinct characteristics of the housing...

This paper analyses the risk and return of loans portfolios in a joint setting. I develop a model to obtain the distribution of loans returns. I use this model to describe the investment opportunity set of lenders using mean-variance analysis with a Value at Risk constraint. I also obtain closed...

Investors seek to hedge against interest rate risk by taking long or short positions on bonds ofdifferent maturities. We study changes in risk taking behavior in a low interest rateenvironment by estimating a market stochastic discount factor that is non-linear and thereforeconsistent with the...

Recent policy discussion includes the introduction of diversification requirements for sovereign bond portfolios of European banks. In this paper, we evaluate the possible effects of these constraints on risk and diversification in the sovereign bond portfolios of the major European banks....

The equity of too-big-to-fail banks could be deemed less risky due to implicit government guarantees. However, such guarantees could also amplify a moral hazard problem that induces large banks to take excessive risk. If such risk is mispriced by the market due to the increased complexity of...

This study investigates whether banks and insurance corporations perform regulatory arbitrage by buying bonds with inflated credit ratings. We argue that credit rating based capital requirements incentivize banks and insurance corporations to hold more bonds with inflated credit ratings. We...

In setting minimum capital requirements for trading portfolios, the Basel Committee on Banking Supervision (1996, 2011a, 2013) initially used Value-at-Risk (VaR), then both VaR and stressed VaR (SVaR), and most recently, stressed Conditional VaR (SCVaR). Accordingly, we examine the use of SCVaR...

Recent policy discussion includes the introduction of diversification requirements for sovereign bond portfolios of European banks. In this paper, we evaluate the possible effects of these constraints on risk and diversification in the sovereign bond portfolios of the major European banks....

Hedge Fund Replication has generated significant academic and practitioner interest in recent years. This interest has been translated into several product offerings by the major investment backs such as Goldman Sachs, Morgan Stanley and J.P Morgan. Replication products generally follow three...

This study investigates the net effects of sectoral loan concentration on banks in Hong Kong. Research in this area remains inconclusive, due to the potential trade-off between concentration risks and specialisation gains. Our empirical results, based on a regulatory panel dataset of licensed...