In this paper we try to understand the economic explanation of the difference in predictability afforded by the old and the new-generation return-predicting factors. To do so, first we show that the Cieslak-Povala (2010) approach can be expressed in terms of a conditional prediction of where the...

This paper tries to assess to what extent libertarian paternalism lives up to its libertarian credentials, and whether this “softer” version of paternalism is more or less desirable than the traditional, more coercive (but also more transparent) form. Since much is made in the libertarian...

We present an extension of the LIBOR market model which allows for stochastic instantaneous volatilities of the forward rates in a displaced-diffusion setting. We show that virtually all the powerful and important approximations that apply in the deterministic setting can be successfully and...

We present a methodology to aggregate in a coherent manner conditional stress losses in a trading or banking book. The approach bypasses the specification of unconditional probabilities of the individual stress events and ensures by a linear programming approach so that the (subjective or...