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Adding The Time Dimension: Optimal Rebalancing  

Mark Kritzman, Simon Myrgren, and Sebastien Page

Print publication date:
Dec 2011
Online publication date:
Nov 2012
A technique called dynamic programming can be used to identify an optimal rebalancing schedule, which significantly reduces rebalancing and sub-optimality costs. Dynamic programming ... More

Algorithmic Trading, Optimal Execution, and Dyna Mic Port Folios  

Petter N. Kolm and Lee Maclin

Print publication date:
Dec 2011
Online publication date:
Nov 2012
This article discusses the portfolio optimization with market impact costs, combining execution and portfolio risk, and dynamic portfolio analysis. A multi-period portfolio optimization ... More

Analyzing Three-Dimensional Panel Data of Forecasts  

Antony Davies, Kajal Lahiri, and Xuguang Sheng

Print publication date:
Jul 2011
Online publication date:
Sep 2012
This article illustrates how frameworks built around multidimensional panel data of forecasts can be used not only to test the rational expectations hypothesis correctly, but also to study ... More

Asset Liability Management For Sovereign Wealth Funds  

Francis Breedon and Robert Kosowski

Print publication date:
Dec 2011
Online publication date:
Nov 2012
The article aims to discuss the optimal asset allocation for sovereign wealth funds (SWF). The main purpose of a commodity based sovereign wealth fund is to create a permanent income ... More

Bayesian Methods In Finance  

Eric Jacquier and Nicholas Polson

Print publication date:
Sep 2011
Online publication date:
Nov 2012
This article looks at the usefulness of Bayesian methods in finance. It covers all the major topics in finance. It discusses the predictability of the mean of asset returns, central to ... More

Bayesian Methods In Investing  

Colm O’Cinneide

Print publication date:
Dec 2011
Online publication date:
Nov 2012
This article provides an overview on the Bayesian approach to investment decisions, emphasizing its foundations, its most practical uses, and the computational techniques that are ... More

Contagion Models in Credit Risk  

Mark H. A. Davis

Print publication date:
Jan 2011
Online publication date:
Sep 2012
This article gives an account of mathematical techniques for credit risk models where there is contagion between the obligors, i.e., default of one party either directly causes default of ... More

Counterparty Risk in Credit Derivative Contracts  

Jon Gregory

Print publication date:
Jan 2011
Online publication date:
Sep 2012
This article addresses the challenges posed by marginal default distribution models – for illustrative purposes it uses a straightforward Gaussian copula – and details counterparty risk ... More

Credit Value Adjustment in the Extended Structural Default Model  

Alexander Lipton and Andrew Rennie

Print publication date:
Jan 2011
Online publication date:
Sep 2012
This article develops a methodology for valuing the counterparty credit risk inherent in credit default swaps, and presents a multi-dimensional extension of Merton's model (Merton 1974), ... More

Decentralized Decision Making In Investment Management  

Jules H. van Binsbergen, Michael W. Brandt, and Ralph S. J. Koijen

Print publication date:
Dec 2011
Online publication date:
Nov 2012
The article addresses the investment problem of a pension fund in which a centralized decision maker, the Chief Investment Officer (CIO), employs multiple asset managers to implement ... More

Default Recovery Rates and Lgd in Credit Risk Modelling and Practice  

Edward I. Altman

Print publication date:
Jan 2011
Online publication date:
Sep 2012
Three main variables affect the credit risk of a financial asset: (i) the probability of default (PD); (ii) the ‘loss given default’ (LGD), which is equal to one minus the recovery rate in ... More

Equity Factor Models: Estimation And Extensions  

Dan Dibartolomeo

Print publication date:
Dec 2011
Online publication date:
Nov 2012
The use of equity factor models is increasingly significantly within the institutional asset management community. They are routinely used to estimate the potential benchmark relative ... More

An EVT Primer for Credit Risk  

Valérie Chavez‐Demoulin and Paul Embrechts

Print publication date:
Jan 2011
Online publication date:
Sep 2012
This article aims to provide the basics any risk manager should know on the modelling of external events, and this from a past–present–future research perspective. Such events are often ... More

An Exposition Of CDS Market Models  

Lutz Schloegl

Print publication date:
Jan 2011
Online publication date:
Sep 2012
This article gives an introduction to the mechanics and techniques used to develop market models for credit, focusing on the single credit case. The concept of a background filtration was ... More

Fixed Income Investment Risk  

Kenneth Winston

Print publication date:
Dec 2011
Online publication date:
Nov 2012
This article explores the component parts of the global fixed income market and focus on risks arising from interest rates and credit spreads. In fixed income markets including foreign ... More

Forecasting Financial Time Series  

Terence C. Mills

Print publication date:
Jul 2011
Online publication date:
Sep 2012
This article provides a comprehensive review of the core ideas and models that have proved central to the forecasting of financial time series. Forecasting the levels or, more ... More

Forecasting the Energy Markets  

Derek W. Bunn and Nektaria V. Karakatsani

Print publication date:
Jul 2011
Online publication date:
Sep 2012
This article, which reviews the modeling and forecasting of energy commodities prices, with a particular focus on spot electricity prices, describes the complexities of the market and ... More

Forecasting Volatility Using High-Frequency Data  

Peter Reinhard Hansen and Asger Lunde

Print publication date:
Jul 2011
Online publication date:
Sep 2012
This article focuses on some aspects of high-frequency data and their use in volatility forecasting. High-frequency data can be used to construct volatility forecasts. The article reviews ... More

Fund-of-Funds Construction by Statistical Multiple Testing Methods  

Michael Wolf and Dan Wunderli

Print publication date:
Dec 2011
Online publication date:
Nov 2012
This article addresses the problem of fund selection from a statistical point of view. The analysis is based solely on the track records of individual managers. The statistical problems ... More

A Guide to Modelling credit term Structures  

Alexander Lipton and Andrew Rennie

Print publication date:
Jan 2011
Online publication date:
Sep 2012
This article examines the conventional bond pricing methodology and shows that it does not adequately reflect the nature of the credit risk faced by investors. In particular, it ... More

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