NBER WORKING PAPER SERIES STOCK AND BOND PRICING IN AN AFFINE ECONOMY
... The general structure of our model is as follows. We begin by specifying the processes for the state variables that account for the fundamental nncertainty in the economy. Importantly, a subset of the set of state variables represents observable economic factors such as dividend growth and inflation ...
... The general structure of our model is as follows. We begin by specifying the processes for the state variables that account for the fundamental nncertainty in the economy. Importantly, a subset of the set of state variables represents observable economic factors such as dividend growth and inflation ...
Leverage, Risk and Regulatory Capital in Latin
... induce increases in loan rates with negative effects on firms and consumers. Other authors point that these effects are negligible and the benefits are extensive, asking for more capital to be raised. In theory, more capital can decrease the bank risk, which is followed by a reduction in the cost of ...
... induce increases in loan rates with negative effects on firms and consumers. Other authors point that these effects are negligible and the benefits are extensive, asking for more capital to be raised. In theory, more capital can decrease the bank risk, which is followed by a reduction in the cost of ...
PDF
... Copyright 2009 by Ryan Larsen, Dmitry Vedenov, and David Leatham. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. ...
... Copyright 2009 by Ryan Larsen, Dmitry Vedenov, and David Leatham. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. ...
Uncertainty, Default and Risk
... forecast errors, but our decision rule, NPV, still works best. ...
... forecast errors, but our decision rule, NPV, still works best. ...
The Global Secondary Market: A Growing and Evolving Investment
... The assets acquired in complex secondary transactions are often similar to or the same as those involved in traditional transactions. Accordingly, they should not be viewed as having a different risk profile from the underlying assets involved in traditional deals. However, complex transactions typi ...
... The assets acquired in complex secondary transactions are often similar to or the same as those involved in traditional transactions. Accordingly, they should not be viewed as having a different risk profile from the underlying assets involved in traditional deals. However, complex transactions typi ...
LIQUIDITY PAPER v4 - Institute and Faculty of Actuaries
... Nonetheless, liquidity risk is likely to feature in the FSA s ARROW visits and life insurers will need to address this risk more formally than they would have done previously as part of their own individual capital assessments (ICA), carried out as part of 1.2.26R of the PSB. ...
... Nonetheless, liquidity risk is likely to feature in the FSA s ARROW visits and life insurers will need to address this risk more formally than they would have done previously as part of their own individual capital assessments (ICA), carried out as part of 1.2.26R of the PSB. ...
Serial Dependence and Portfolio Performance in the Swedish Stock
... arbitrage portfolio. For daily data the VAR model works quite well, yielding a higher Sharpe ratio than the two other arbitrage portfolios. For weekly and monthly data, the performance is not as good. In the weekly case the mean return is negative and in the monthly case the mean return is close to ...
... arbitrage portfolio. For daily data the VAR model works quite well, yielding a higher Sharpe ratio than the two other arbitrage portfolios. For weekly and monthly data, the performance is not as good. In the weekly case the mean return is negative and in the monthly case the mean return is close to ...
Effect of Liquidity Risk on Financial Performance of Insurance
... surveys indicate that globally insurers have not historically directed as much time and effort to analyzing, modeling, and quantifying operational risk as they have for other categories of risk, such as insurance risk and asset-related risks. There is, however, a trend towards greater regulatory att ...
... surveys indicate that globally insurers have not historically directed as much time and effort to analyzing, modeling, and quantifying operational risk as they have for other categories of risk, such as insurance risk and asset-related risks. There is, however, a trend towards greater regulatory att ...
Does a Structural Macroeconomic Model Help Long
... Several papers demonstrate that macro variables are useful for predicting financial returns. See, e.g., Cochrane (1991), Lettau and Ludvigson (2001), Santos and Veronesi (2006), and Cooper and Priestley (2008) for stock returns and Ang and Piazzesi (2003), Hördahl et al. (2008), and Rudebusch and ...
... Several papers demonstrate that macro variables are useful for predicting financial returns. See, e.g., Cochrane (1991), Lettau and Ludvigson (2001), Santos and Veronesi (2006), and Cooper and Priestley (2008) for stock returns and Ang and Piazzesi (2003), Hördahl et al. (2008), and Rudebusch and ...
Strategy Spotlight: Considerations in volatility
... speed of time decay for options or the magnitude of the term structure roll-down, which is typically highest for closest-to-maturity instruments. Strike selection (if applicable) – such as a predefined strike based on option moneyness, or delta. This selection depends greatly on the trader’s skill ...
... speed of time decay for options or the magnitude of the term structure roll-down, which is typically highest for closest-to-maturity instruments. Strike selection (if applicable) – such as a predefined strike based on option moneyness, or delta. This selection depends greatly on the trader’s skill ...
Home bias and international risk sharing
... Table 7 reports the results of multiple regressions for income risk sharing. The first row includes interactions for all three asset categories: the point estimates for equity and debt are of similar magnitude; equity is clearly significant and debt is nearly significant at the 5% level while FDI ha ...
... Table 7 reports the results of multiple regressions for income risk sharing. The first row includes interactions for all three asset categories: the point estimates for equity and debt are of similar magnitude; equity is clearly significant and debt is nearly significant at the 5% level while FDI ha ...
Ethical Investment and Portfolio Theory
... of very large corporations—themselves decent individuals committed to a range of values—believed that it was unethical to consider issues other than shareholder value in their deliberations” (Sampford and Berry, [13]). According to Richardson [14], the “separation theorem” suggests the best way for ...
... of very large corporations—themselves decent individuals committed to a range of values—believed that it was unethical to consider issues other than shareholder value in their deliberations” (Sampford and Berry, [13]). According to Richardson [14], the “separation theorem” suggests the best way for ...
Russell Quarterly Economic and Market Review
... Source for MSCI data: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial product ...
... Source for MSCI data: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial product ...
Financial Management
... In addition Conventional financial management tagged with Shriah rulings is termed as Islamic financial management. In this case data used whether historical or current and evaluation process for valuation of any asset remains the same, However investment strategy differs in some ways. 1. Managerial ...
... In addition Conventional financial management tagged with Shriah rulings is termed as Islamic financial management. In this case data used whether historical or current and evaluation process for valuation of any asset remains the same, However investment strategy differs in some ways. 1. Managerial ...
Long-term Capital Market Return Assumptions
... still in the early innings of the demand/supply adjustment process, prices will ultimately have to rise to provide sufficient incentive for supply to keep up with long-term demand. Demand for infrastructure investments remains strong among liability-driven investors and those seeking income-generati ...
... still in the early innings of the demand/supply adjustment process, prices will ultimately have to rise to provide sufficient incentive for supply to keep up with long-term demand. Demand for infrastructure investments remains strong among liability-driven investors and those seeking income-generati ...
Analysis and comparison of methods of risk
... From the principles of revenue valuation results that it should be a forecast of future risk-free rate. In this case rf prediction is based on the past performance of government bonds or on direct view into the future. Prediction of rf based on the past return on government bonds: Applying averages ...
... From the principles of revenue valuation results that it should be a forecast of future risk-free rate. In this case rf prediction is based on the past performance of government bonds or on direct view into the future. Prediction of rf based on the past return on government bonds: Applying averages ...
Labor income risk and asset returns
... cay of Lettau and Ludvigson (2001a)), should help predict U.S. quarterly stock market returns and explain the cross-section of average returns. I …nd that a) ‡uctuations in expected future labor income are a strong predictor of both real stock returns and excess returns over a Treasury bill rate, b) ...
... cay of Lettau and Ludvigson (2001a)), should help predict U.S. quarterly stock market returns and explain the cross-section of average returns. I …nd that a) ‡uctuations in expected future labor income are a strong predictor of both real stock returns and excess returns over a Treasury bill rate, b) ...
Materials
... the Medical Center will present a detailed list of renovation and infrastructure projects expected to cost between $2 million and $5 million, to be funded with non-general fund cash (no debt), and expected to be initiated within the next fiscal year. This shorter, annual approval process allows thes ...
... the Medical Center will present a detailed list of renovation and infrastructure projects expected to cost between $2 million and $5 million, to be funded with non-general fund cash (no debt), and expected to be initiated within the next fiscal year. This shorter, annual approval process allows thes ...
Do Precious Metals Shine in the Portfolio of a Nordic
... The reason why we are interested in the low correlations that precious metals have with the equity market is the Modern portfolio theory by Harry Markowitz (1952). The theory states that investors can reduce the risk in their investment portfolios by choosing assets that are not perfectly correlated ...
... The reason why we are interested in the low correlations that precious metals have with the equity market is the Modern portfolio theory by Harry Markowitz (1952). The theory states that investors can reduce the risk in their investment portfolios by choosing assets that are not perfectly correlated ...
iv special features - European Central Bank
... regression makes it possible to account for factors that have an impact on banks’ average risks from year to year, such as a general economic boom or downturn. It should be noted that it is possible that leverage (i.e. the inverse of the capital ratio) and banks’ riskiness are simultaneously determi ...
... regression makes it possible to account for factors that have an impact on banks’ average risks from year to year, such as a general economic boom or downturn. It should be noted that it is possible that leverage (i.e. the inverse of the capital ratio) and banks’ riskiness are simultaneously determi ...
lincreasedl Correlation in Bear Markets
... By using the VAR methodology, we are able to estimate the probabilifrir of a portfolio's reti3,m failing below a thre.shold (V,AR) return with a prespecified confidence level. With constanl correlation over the joint return distribution assumed, th,e probability^ of the portfoiio return falling belo ...
... By using the VAR methodology, we are able to estimate the probabilifrir of a portfolio's reti3,m failing below a thre.shold (V,AR) return with a prespecified confidence level. With constanl correlation over the joint return distribution assumed, th,e probability^ of the portfoiio return falling belo ...
Monthly Commentary—Artisan International Small
... Carefully consider the Fund’s investment objective, risks and charges and expenses. This and other important information is contained in the Fund's prospectus and summary prospectus, which can be obtained by calling 800.344.1770. Read carefully before investing. International investments involve spe ...
... Carefully consider the Fund’s investment objective, risks and charges and expenses. This and other important information is contained in the Fund's prospectus and summary prospectus, which can be obtained by calling 800.344.1770. Read carefully before investing. International investments involve spe ...
Fat Tails and their (Un)happy Endings
... Furthermore, it can be shown that the copula capital structure model is a natural extension of the contingent claim approach of Black and Scholes (1973) and Merton (1974) since the value of equity is determined by a portfolio of options in several projects, or that each tranche comprises long and sh ...
... Furthermore, it can be shown that the copula capital structure model is a natural extension of the contingent claim approach of Black and Scholes (1973) and Merton (1974) since the value of equity is determined by a portfolio of options in several projects, or that each tranche comprises long and sh ...
Market Risk, Mortality Risk, and Sustainable Retirement
... that matter, throughout the retirement phase. (For the purpose of clarity, we define “retirement” here as the moment when a person begins net draw-downs from his or her accumulated savings to meet living expenses; see Kingston (2000) for more on this point.) While some simple rules of thumb have be ...
... that matter, throughout the retirement phase. (For the purpose of clarity, we define “retirement” here as the moment when a person begins net draw-downs from his or her accumulated savings to meet living expenses; see Kingston (2000) for more on this point.) While some simple rules of thumb have be ...
monThlY SEASonAlITY In CUrrEnCY rETUrnS: 1972-2010
... in the calendar, we would expect that FX returns exhibit these temporary demand and supply imbalances in the form of specific patterns in monthly returns. This motivates us to investigate the monthly seasonality of FX returns in this study. We investigate the monthly seasonal pattern in the returns ...
... in the calendar, we would expect that FX returns exhibit these temporary demand and supply imbalances in the form of specific patterns in monthly returns. This motivates us to investigate the monthly seasonality of FX returns in this study. We investigate the monthly seasonal pattern in the returns ...
Beta (finance)
In finance, the beta (β) of an investment is a measure of the risk arising from exposure to general market movements as opposed to idiosyncratic factors. The market portfolio of all investable assets has a beta of exactly 1. A beta below 1 can indicate either an investment with lower volatility than the market, or a volatile investment whose price movements are not highly correlated with the market. An example of the first is a treasury bill: the price does not go up or down a lot, so it has a low beta. An example of the second is gold. The price of gold does go up and down a lot, but not in the same direction or at the same time as the market.A beta greater than one generally means that the asset both is volatile and tends to move up and down with the market. An example is a stock in a big technology company. Negative betas are possible for investments that tend to go down when the market goes up, and vice versa. There are few fundamental investments with consistent and significant negative betas, but some derivatives like equity put options can have large negative betas.Beta is important because it measures the risk of an investment that cannot be reduced by diversification. It does not measure the risk of an investment held on a stand-alone basis, but the amount of risk the investment adds to an already-diversified portfolio. In the capital asset pricing model, beta risk is the only kind of risk for which investors should receive an expected return higher than the risk-free rate of interest.The definition above covers only theoretical beta. The term is used in many related ways in finance. For example, the betas commonly quoted in mutual fund analyses generally measure the risk of the fund arising from exposure to a benchmark for the fund, rather than from exposure to the entire market portfolio. Thus they measure the amount of risk the fund adds to a diversified portfolio of funds of the same type, rather than to a portfolio diversified among all fund types.Beta decay refers to the tendency for a company with a high beta coefficient (β > 1) to have its beta coefficient decline to the market beta. It is an example of regression toward the mean.