We develop an efficient Monte Carlo simulation-based methodology for value at risk (VaR) and sensitivity analysis of mortgage-backed securities (MBS) that employs an importance sampling technique developed for quadratic VaR models. Our approach, whose validity is derived from a fundamental...

Independent sector assumption in the CreditRisk+ has been a major obstacle to implementing the model. Attempts to overcome this limitation have not gained much success. This paper proposes an extension of the original model which accommodates a wide range of sector covariance structures....

We estimate an ex ante probability of extreme negative returns (crashes) of individual stocks as a measure of potential overpricing and find that stocks with a high probability of crashes earn abnormally low returns. Stocks with high crash probability are overpriced regardless of the level of...

We develop a conditional version of the consumption capital asset pricing model (CCAPM) using the conditioning variable from the cointegrating relation among macroeconomic variables (dividend yield, term spread, default spread, and short-term interest rate). Our conditioning variable has a...

We develop a conditional version of the consumption CAPM using the conditioning variable derived from the cointegrated relationship among macroeconomic variables (dividend yield, term spread, default spread, and short-term interest rate). Our conditioning variable has a strong power to predict...

The recent development of indexed catastrophe (CAT) securities is a concern in the insurance literature. We refer to the two existing prominent explanations as the systematic risk approach and the moral hazard approach. Under the systematic risk approach, the systematic risk portion is hedged by...

We develop a conditional version of the consumption CAPM using the conditioning variable from the cointegrating relation among macroeconomic variables (dividend yield, term spread, default spread, and short-term interest rate). Our conditioning variable has a strong power to predict market...

<section xml:id="fut21651-sec-0001"> We examine whether and how investors establish positions in options when they have negative information in the U.S. markets from August 2004 to January 2009. Our empirical results show that options seem to be actively and effectively used for the exploitation of negative information. General...</section>