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Working Paper

Risk Everywhere: Modeling and Managing Volatility

January 26, 2016 - Tim Bollerslev Benjamin Hood John J. Huss Lasse H. Pedersen

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 - Nicolae Gârleanu Lasse H. Pedersen

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

Embedded Leverage

November 1, 2012 - Andrea Frazzini Lasse H. Pedersen

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

Early Option Exercise: Never Say Never

March 18, 2016 - Mads Vestergaard Jensen Lasse H. Pedersen

A classic rule in financial economics: Never exercise a call option and never convert a convertible bond, except just before expiration or dividend payments. This paper shows how this rule breaks down when financial frictions are introduced.

White Paper

Building a Better Commodities Portfolio

July 1, 2012 - Bradley Kay Ari Levine Yao Hua Ooi Lasse H. Pedersen

Rather than relying on passive indexes like the S&P GSCI and the Dow Jones-UBS Commodity Index, investors can potentially build a better commodities portfolio by balancing risk across sectors and targeting a steady level of volatility through time.

Journal Article

Dynamic Trading With Predictable Returns and Transactions Costs

November 1, 2013 - Nicolae Gârleanu Lasse H. Pedersen

Active investors and asset managers — such as hedge funds, mutual funds and proprietary traders — try to predict security returns and trade to profit from their predictions.

Journal Article

Adverse Selection and the Required Return

January 1, 2004 - Nicolae Gârleanu Lasse H. Pedersen

Securities are traded by buyers and sellers with different levels of knowledge about those securities.

Working Paper

Measuring Systemic Risk

April 23, 2010 - Viral V. Acharya Lasse H. Pedersen Thomas Philippon Matthew P. Richardson

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

Generalized Recovery

March 1, 2016 - Christian Skov Jensen David Lando Lasse H. Pedersen

We shed new light, both theoretically and empirically, on the Holy Grail in financial economics: decoding probabilities and risk preferences from asset prices.

Journal Article

Quality Minus Junk

October 9, 2013 - Cliff Asness Andrea Frazzini Lasse H. Pedersen

We show that a quality-minus-junk (QMJ) factor that goes long high-quality stocks and shorts low-quality stocks earns significant risk-adjusted returns in the U.S. and globally. Also, controlling for quality resurrects the otherwise moribund size effect.