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Working Paper
Measuring Systemic Risk
April 23, 2010
We present a simple model of systemic risk and show how each financial institution’s contribution to systemic risk can be measured and priced—its propensity to be undercapitalized when the system as a whole is undercapitalized, which increases in its leverage, volatility, correlation, and tail-dependence.
Working Paper
Embedded Leverage
November 1, 2012
Embedded leverage—the amount of market exposure per unit of committed capital—has become an important feature of financial instruments. We study embedded leverage in equity options, index options and ETFs, and how it affects the required returns.
Working Paper
Risk Everywhere: Modeling and Managing Volatility
January 26, 2016
This paper finds similarities in realized volatility patterns across assets and asset classes, based on a high-frequency dataset for more than 50 commodities, currencies, equity indices and fixed income instruments spanning more than two decades.
Working Paper
Repeated Auctions With Endogenous Selling
February 1, 2003
Auction theory studies the expected revenue to an owner committed to selling—as when a government sells an oil field, where the sale decision is unrelated to its quality. This paper addresses questions raised by auctions where owners choose to sell.
Working Paper
Deep Value
December 4, 2017
We examine the efficacy of a hypothetical deep value strategy—where the valuation spread between cheap and expensive securities is wide relative to its history—across global asset classes and also provide new evidence on competing theories for the value premium.
Working Paper
Two Monetary Tools: Interest Rates and Haircuts
May 1, 2011
What happens when financial institutions, which play a key role as credit providers in the economy, become financially constrained themselves? This paper studies the ramifications during a liquidity crisis.
White Paper
Understanding Managed Futures
November 1, 2010
Many investors have shied away from managed futures, perhaps due to a lack of understanding of how and why they work. This paper shows how such a strategy can be implemented. We then discuss their performance and diversification benefits historically
Journal Article
Demand-Based Option Pricing
February 25, 2009
Index and equity options are notoriously difficult to price.
Interview
Words From the Wise: Robert Engle on Portfolio Management
October 2, 2017
This issue of "Words from the Wise" features an interview with Robert Engle, Nobel prize winner and father of risk modeling. Engle discusses his breakthrough research on analyzing economic time series with time-varying volatility.