As hedge fund replication based on factor models has encountered growing interest among professionals and academics, and despite the launch of numerous products (indexes and mutual funds) in the past year, it faced many critics. In this paper, we consider three of the main critiques, namely the...

In this paper, we consider the open question on Spearman's rho and Kendall's tau of Nelsen [1991]. Using a technical hypothesis, we can answer in the positive. One question remains open: how can we understand the technical hypothesis? Because this hypothesis is not right in general, we could...

In this paper, we consider the problem of bounds for distribution convolutions and we present some applications to risk management. We show that the upper Frechet bound is not always the more risky dependence structure. It is in contradiction with the belief in finance that maximal risk...

In this paper, we study the approximation procedures introduced by Li, Mikusinski, Sherwood and Taylor [1997]. We show that there exists a bijection between the set of the discretized copulas and the set of the doubly stochastic matrices. For the Bernstein and checkerboard approximations, we...

We consider the problem of modelling the dependence between financial markets. In financial economics, the classical tool is the Pearson (or linear correlation) coefficient to compare the dependence structure. We show that this coefficient does not give a precise information on the dependence...

Capital allocation within a bank is getting more important as the regulatory requirements are moving towards economic-based measures of risk. Banks are urged to build sound internal measures of credit and market risks for all their activities. Internal models for credit, market and operational...

The purpose of this paper is to analyse different implications of the stochastic behavior of asset prices volatilities for option hedging purposes. We present a simple stochastic volatility model for option pricing and illustrate its consistency with financial stylized facts. Then, assuming a...

This article is part of a comprehensive research project on liquidity risk in asset management, which can be divided into three dimensions. The first dimension covers the modeling of the liability liquidity risk (or funding liquidity), the second dimension is dedicated to the modeling of the...