We show that a small set of emerging markets with floating exchange rates expand the investment frontier substantially relative to G10 currencies. The frontier is characterized by an out-of-sample mean-variance efficient portfolio that prices G10- and emerging markets-based trading strategies...

Intermediation capacity varies across dealers, and as a result, misallocation of credit risk reduces the risk-bearing capacity of the dealer sector and increases effective market-level risk aversion. When the efficient reallocation of credit risk within the dealer sector is impaired, interdealer...

I suggest a new channel through which central bank asset purchase programs could have effects on asset prices: The outside option channel. After the global financial crisis, central banks have widened the variety of assets they can purchase. Secondary markets for the majority of the newly...

We introduce artificial intelligence pricing theory (AIPT). In contrast with the APT's foundational assumption of a low dimensional factor structure in returns, the AIPT conjectures that returns are driven by a large number of factors. We first verify this conjecture empirically and show that...

Asset liquidity in modern financial markets is a key but elusive concept. A market is often said to be liquid when the prevailing structure of transactions provides a prompt and secure link between the demand and supply of assets, thus delivering low costs of transaction. Providing a rigorous...

This note sketches the issues that arise while interpreting the relation between macroeconomic volatility and financial risk premia from the perspective of the standard consumption-based asset pricing model. The relation arises from the fact that all assets are priced by the same 'pricing...

The ongoing massive fiscal policy stimulus triggered increasing concerns on the potential impact on interest rate levels, as economic theory predicts. Particularly, the deterioration of some EMU countries' fiscal positions has been putting at risk Eurozone' financial stability. In this paper, we...