We study learning and uncertainty under the factor investing paradigm using an endogenous information model with correlated assets. As investors shift attention from firms towards systematic risk factors, stock prices become less informative, increasing systematic uncertainty and incentivizing...

We design average price portfolio insurance (APPI) strategies with an investment floor and a buffer that is a power of a generalised geometric average of the underlying asset price. We prove that APPI strategies are optimal for investors with hyperbolic absolute risk aversion who become...

In this paper we present a simple closed form stock price formula, which captures empirical regularities of high frequency trading (HFT), based on two factors: (1) exposure to hedge factor; and (2) hedge factor volatility. Thus, the parsimonious formula is not based on fundamental valuation. For...

Trading and investment strategies play an essential part in better understanding fixed income markets. Over-the-counter markets and thousands of different outstanding bonds increase the difficulties to identify adequate comparison methods. Market participants and their practices differ widely...

This paper is the first to analyze and value early exercises of Individual Investors in fixed-income investment products. Assuming decision and transaction costs we consider that a continuous decision-making on holding or exercising is not optimal anymore and propose a new approach to modeling...

The 1987 market crash was associated with a dramatic and permanent steepening of the implied volatility curve for equity index options, despite minimal changes in aggregate consumption. We explain these events within a general equilibrium framework in which expected endowment growth and economic...

In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling...

Ratios that indicate the statistical significance of a fund’s alpha typically appraise its performance. A growing literature suggests that even in the absence of any ability to predict returns, holding options positions on the benchmark assets or trading frequently can significantly enhance...