In this paper we describe the major issues in the weather risk management. We focus on the management of financial risks connected with weather. We first provide a general discussion of the impact of weather on the economy. Then we follow with the overview of the development of the weather risk...

Increasing interconnectivity between electricity wholesale markets requires an efficient allocation scheme in order to provide access to scarce cross-border transmission capacities. In both the US and Europe, existing schemes have primarily induced economically inefficient interconnector use...

Suppose a fund manager uses predictors in changing port-folio allocations over time. How does predictability translate into portfolio decisions? To answer this question we derive a new model within the Bayesian framework, where managers are assumed to modulate the systematic risk in part by...

Using a Bayesian time‐varying beta model, we explore how the systematic risk exposures of hedge funds vary over time conditional on some exogenous variables that managers are assumed to use in changing their trading strategies. In such a setting, we impose a structure on fund returns, betas...

This paper builds on existing asset pricing models in an intertemporal CAPM framework to investigate the pricing of options on interest rate futures. It addresses the issues of selecting the preferred pricing kernel model by employing the second Hansen-Jagannathan distance (HJD) criterion. This...

Suppose a fund manager uses predictors in changing portfolio allocations over time. How does predictability translate into portfolio decisions? To answer this question we derive a new model within the Bayesian framework, where managers are assumed to modulate the systematic risk in part by...

Based on the fact that realized measures of volatility are affected by measurement errors, we introduce a new family of discrete-time stochastic volatility models having two measurement equations relating both observed returns and realized measures to the latent conditional variance. A...

In dynamic asset pricing models, when the model structure becomes complex and derivatives data are introduced in estimation, traditional Bayesian MCMC methods converge slowly, are difficult to design efficient proposals for parameters, and have large computational cost. We propose a two-stage...

This paper examines the properties of the variance risk premium (VRP). We propose a flexible asset pricing model that captures co-jumps in prices and volatility, and self-exciting jump clustering. We estimate the model on equity returns and variance swap rates at different horizons. The total...