Hedge fund replication based on factor models is encountering growing interest. In this paper, we investigate the implications of substituting standard rolling windows regressions, which appear ad-hoc, with more efficient methodologies like the Kalman Filter. We show that the copycats...

Recent experience has shown the importance of shocks in sovereign bond markets and the propagation of these shocks at the international level. This text analyzes these extreme risks, both in the univariate (crisis in a sole country) and the multivariate (contagion phenomena) dimensions, using...

Alternative risk premia are encountering growing interest from investors. The vast majority of the academic literature has been focusing on describing the alternative risk premia (typically, momentum, carry and value strategies) individually. In this article, we investigate the question of...

Minimum variance and equally-weighted portfolios have recently prompted great interest both from academic researchers and market practitioners, as their construction does not rely on expected average returns and is therefore assumed to be robust. In this paper, we consider a related approach,...

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...

Hedge fund replication is knowing growing interest in the financial industry. Most products make use of factor-based models where one is fitting a model of hedge fund returns in terms of investable market factors (e.g. S&P...). We here investigate whether combination of regression methodologies...

This paper examines the determinants of large comovements in financial markets. More specifically, we analyze the relationship between a dependence indicator drawn from multivariate extreme value theory and a set of bilateral economic and financial factors. Implementation of the idea is realized...

Several authors have proposed series expansion methods to price options when the risk-neutral density is asymmetric and leptokurtic. Among these, Corrado and Su (1996) provide an intuitive pricing formula based on a Gram-Charlier Type A series expansion. However, their formula contains a...

After the seminal paper of Jarrow and Rudd (1982), several authors have proposed to use different statistical series expansion to price options when the risk-neutral density is asymmetric and leptokurtic. Amongst them, one can distinguish the Gram-Charlier Type A series expansion (Corrado and...

It is well known that non-normality plays an important role in asset and risk management.However, handling a large number of assets has long been a challenge.In this paper, we present a statistical technique that extends Principal ComponentAnalysis to higher moments such as skewness and...