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The Risk Premium Overlaps with FVA and KVA
EL Hadj Braiek, Noureddine - 2017
We consider the derivatives pricing problem in credit risk. By assessing a market price to the hedged risks and a Capital Asset Pricing Model price to the unhedged part, we derive a generalized pricing formula that nests both the classic “Capital Markets” and “Corporate Finance” models....
Persistent link: https://www.econbiz.de/10012967950
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Demystifying Rebalancing Premium : A Methodological Path to Risk Premia Engineering
Dubikovsky, Vladislav - 2015
Volatility is usually considered as a synonym for risk. Mainstream financial theory states that higher portfolio … framework that encompasses various investment styles and portfolio construction methodologies. Modern Portfolio Theory is a one … theory. We show that Markowitz portfolios and Warren Buffett's investment style are valid special cases of optimal growth …
Persistent link: https://www.econbiz.de/10013018815
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Pricing green financial products
Melzer, Awdesch; Härdle, Wolfgang; López Cabrera, Brenda - 2017
With increasing wind power penetration more and more volatile and weather dependent energy is fed into the German electricity system. To manage the risk of windless days and transfer revenue risk from wind turbine owners to investors wind power derivatives were introduced. These insurance-like...
Persistent link: https://www.econbiz.de/10011710540
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Beta Stochastic Volatility Model
Sepp, Artur - 2012
We introduce the beta stochastic volatility model and discuss empirical features of this model and its calibration. This model is appealing because, first, its parameters can be easily understood and calibrated and, second, it produces steeper forward skews, compared to traditional stochastic...
Persistent link: https://www.econbiz.de/10013100401
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Fundamental Theorem of Asset Pricing on Measurable Spaces Under Uncertainty
Leippold, Markus - 2013
It is common in the financial mathematics literature to start by fixing a probability space $(\Omega,\mathcal F,\mathbb P)$, on which the underlying price process is defined. We depart from this route in that we do not fix the prior $\mathbb P$. Under very general assumptions, we recover the...
Persistent link: https://www.econbiz.de/10013082678
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Asset Price Trend Theory : Reframing Portfolio Theory from the Ground Up
Dubois, Robert - 2013
Traditional portfolio optimization models specify placement of capital as rather irrevocably and fully at risk through investment horizon(s) or continuously. Under this constraint, asset class allocation typically serves as primary mode of diversification, pursuing risk moderation by seeking to...
Persistent link: https://www.econbiz.de/10013084090
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The Price of Risk : From Modern Portfolio Theory to Leveraged Portfolio Theory
Le Marois, Olivier - 2019
The Modern Portfolio Theory (MPT) has been the cornerstone of the asset allocation for over 40 years. In the past …, such as the recent sub-prime crisis. The proposed Leveraged Portfolio Theory (LPT) removes the most fundamental axiom of … distribution for assets return, we obtain the classical CAPM beta in LPT framework. We show that extreme risk underestimation by …
Persistent link: https://www.econbiz.de/10012905661
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A Measure of Pure Causality : Application to the CAPM Framework
Lee, Woongki - 2020
model to estimate it. I apply this method to the capital asset pricing model (CAPM) framework, and analyze the pure …
Persistent link: https://www.econbiz.de/10012827721
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The Low-Risk Effect, from Betting Against Beta to Betting Against Correlation
Pasetti, Tommaso; Montagna, Dennis Marco - 2022
provide also empirical evidence? Starting form the “father” of Modern Portfolio Theory, passing through Sharpe’s CAPM and …
Persistent link: https://www.econbiz.de/10013309784
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Equity Machine Factor Models
Noguer i Alonso, Miquel; Zoonekynd, Vincent - 2022
We examine in this paper the training and test set performance of several equity factor models with a dataset of 20 years of data, 1,200 stocks and 100 factors. First, we examine several models to forecast expected returns, which can be used as baselines for more complex models: linear...
Persistent link: https://www.econbiz.de/10014255242