Annals of Finance最新文献_第9页

Two sided efficient frontiers at multiple time horizons 在多个时间范围内的双边有效边界

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Annals of Finance Pub Date : 2022-06-06 DOI: 10.1007/s10436-022-00411-0

Dilip B. Madan, King Wang

{"title":"Two sided efficient frontiers at multiple time horizons","authors":"Dilip B. Madan, King Wang","doi":"10.1007/s10436-022-00411-0","DOIUrl":"10.1007/s10436-022-00411-0","url":null,"abstract":"<div><p>Two price economy principles motivate measuring risk by the cost of acquiring the opposite of the centered or pure risk position at its upper price. Asymmetry in returns leads to differences in risk charges for short and long positions. Short risk charges dominate long ones when the upper tail dominates the comparable lower tail for charges based on distorted expectations. Positive mean return targets acquire long positions with negative mean return targets taking short positions. In each case the appropriate risk charge is minimized to construct two frontiers, one for the positive, and the other for negative, mean return targets. Multivariate return distributions reflect limit laws given by Q self-decomposable laws displaying decay rates in skewness and excess kurtosis slower than those for processes of independent and identically distributed returns. Frontiers at longer horizons display greater efficiency reflected by lower risk charges for comparable mean return targets. The short side frontiers also display greater risk charges than their long side counterparts. All efficient portfolios deliver asset pricing equations whereby required returns in excess of a reference rate are a market price of risk times a risk gradient evaluated at the efficient portfolio. Variations in frontiers and points on the frontier induce differences in reference rates, risk gradients, and the market prices of risk that can yet lead to comparable required returns.</p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"18 3","pages":"327 - 353"},"PeriodicalIF":1.0,"publicationDate":"2022-06-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46369022","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

引用次数: 0

Dynamic optimal hedge ratio design when price and production are stochastic with jump 价格和产量随机跳跃时的动态最优对冲比率设计

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Annals of Finance Pub Date : 2022-05-02 DOI: 10.1007/s10436-022-00410-1

Nyassoke Titi Gaston Clément, Sadefo Kamdem Jules, Fono Louis Aimé

引用次数: 0

Derivatives-based portfolio decisions: an expected utility insight 基于衍生品的投资组合决策：预期效用洞察

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Annals of Finance Pub Date : 2022-04-28 DOI: 10.1007/s10436-022-00409-8

Marcos Escobar-Anel, Matt Davison, Yichen Zhu

{"title":"Derivatives-based portfolio decisions: an expected utility insight","authors":"Marcos Escobar-Anel, Matt Davison, Yichen Zhu","doi":"10.1007/s10436-022-00409-8","DOIUrl":"10.1007/s10436-022-00409-8","url":null,"abstract":"<div><p>This paper challenges the use of stocks in portfolio construction, instead we demonstrate that Asian derivatives, straddles, or baskets could be more convenient substitutes. Our results are obtained under the assumptions of the Black–Scholes–Merton setting, uncovering a hidden benefit of derivatives that complements their well-known gains for hedging, risk management, and to increase utility in market incompleteness. The new insights are also transferable to more advanced stochastic settings. The analysis relies on the infinite number of optimal choices of derivatives for a maximized expected utility theory agent; we propose risk exposure minimization as an additional optimization criterion inspired by regulations. Working with two assets, for simplicity, we demonstrate that only two derivatives are needed to maximize utility while minimizing risky exposure. In a comparison among one-asset options, e.g. American, European, Asian, Calls and Puts, we demonstrate that the deepest out-of-the-money Asian products available are the best choices to minimize exposure. We also explore optimal selections among straddles, which are better practical choice than out-of-the-money Calls and Puts due to liquidity and rebalancing needs. The optimality of multi-asset derivatives is also considered, establishing that a basket option could be a better choice than one-asset Asian call/put in many realistic situations.</p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"18 2","pages":"217 - 246"},"PeriodicalIF":1.0,"publicationDate":"2022-04-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://link.springer.com/content/pdf/10.1007/s10436-022-00409-8.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42846027","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

引用次数: 1

Rational pricing of leveraged ETF expense ratios 杠杆ETF费用比率的合理定价

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Annals of Finance Pub Date : 2022-04-12 DOI: 10.1007/s10436-022-00408-9

Alex Garivaltis

{"title":"Rational pricing of leveraged ETF expense ratios","authors":"Alex Garivaltis","doi":"10.1007/s10436-022-00408-9","DOIUrl":"10.1007/s10436-022-00408-9","url":null,"abstract":"<div><p>This paper studies the general relationship between the gearing ratio of a Leveraged ETF and its corresponding expense ratio, viz., the investment management fees that are charged for the provision of this levered financial service. It must not be possible for an investor to combine two or more LETFs in such a way that his (continuously-rebalanced) LETF portfolio can match the gearing ratio of a given, professionally managed product and, at the same time, enjoy lower weighted-average expenses than the existing LETF. Given a finite set of LETFs that exist in the marketplace, I give necessary and sufficient conditions for these products to be undominated in the price-gearing plane. In an application of the duality theorem of linear programming, I prove a kind of two-fund theorem for LETFs: given a target gearing ratio for the investor, the cheapest way to achieve it is to combine (uniquely) the two nearest undominated LETF products that bracket it on the leverage axis. This also happens to be the implementation with the lowest annual turnover. For completeness, we supply a second proof of the Main Theorem on LETFs that is based on Carathéodory’s theorem in convex geometry. Thus, say, a triple-leveraged (“UltraPro”) exchange-traded product should never be mixed with cash, if the investor is able to trade in the underlying index. In terms of financial innovation, our two-fund theorem for LETFs implies that the introduction of new, undominated 2.5<span>(times )</span> products would increase the welfare of all investors whose preferred gearing ratios lie between 2<span>(times )</span> (“Ultra”) and 3<span>(times )</span> (“UltraPro”). Similarly for a 1.5x product.</p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"18 3","pages":"393 - 418"},"PeriodicalIF":1.0,"publicationDate":"2022-04-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46762020","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

引用次数: 0

Portfolio selection in quantile decision models 分位数决策模型中的投资组合选择

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Annals of Finance Pub Date : 2022-03-29 DOI: 10.1007/s10436-021-00405-4

Luciano de Castro, Antonio F. Galvao, Gabriel Montes-Rojas, Jose Olmo

{"title":"Portfolio selection in quantile decision models","authors":"Luciano de Castro, Antonio F. Galvao, Gabriel Montes-Rojas, Jose Olmo","doi":"10.1007/s10436-021-00405-4","DOIUrl":"10.1007/s10436-021-00405-4","url":null,"abstract":"<div><p>This paper develops a model for optimal portfolio allocation for an investor with quantile preferences, i.e., who maximizes the <span>(tau )</span>-quantile of the portfolio return, for <span>(tau in (0,1))</span>. Quantile preferences allow to study heterogeneity in individuals’ portfolio choice by varying the quantiles, and have a solid axiomatic foundation. Their associated risk attitude is captured entirely by a single dimensional parameter (the quantile <span>(tau )</span>), instead of the utility function. We formally establish the properties of the quantile model. The presence of a risk-free asset in the portfolio produces an all-or-nothing optimal response to the risk-free asset that depends on investors’ quantile preference. In addition, when both assets are risky, we derive conditions under which the optimal portfolio decision has an interior solution that guarantees diversification vis-à-vis fully investing in a single risky asset. We also derive conditions under which the optimal portfolio decision is characterized by two regions: full diversification for quantiles below the median and no diversification for upper quantiles. These results are illustrated in an exhaustive simulation study and an empirical application using a tactical portfolio of stocks, bonds and a risk-free asset. The results show heterogeneity in portfolio diversification across risk attitudes.\u0000</p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"18 2","pages":"133 - 181"},"PeriodicalIF":1.0,"publicationDate":"2022-03-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://link.springer.com/content/pdf/10.1007/s10436-021-00405-4.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45262769","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

引用次数: 6

Options on bonds: implied volatilities from affine short-rate dynamics 债券期权:仿射短期利率动态的隐含波动率

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Annals of Finance Pub Date : 2022-03-11 DOI: 10.1007/s10436-022-00407-w

Matthew Lorig, Natchanon Suaysom

引用次数: 3

Regulatory reform and banking diversity: reassessing Basel 3 监管改革和银行业多样性:重新评估巴塞尔协议3

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Annals of Finance Pub Date : 2022-03-02 DOI: 10.1007/s10436-021-00406-3

Giuliana Birindelli, Paola Ferretti, Giovanni Ferri, Marco Savioli

{"title":"Regulatory reform and banking diversity: reassessing Basel 3","authors":"Giuliana Birindelli, Paola Ferretti, Giovanni Ferri, Marco Savioli","doi":"10.1007/s10436-021-00406-3","DOIUrl":"10.1007/s10436-021-00406-3","url":null,"abstract":"<div><p>We investigate whether and how strongly Basel 3 chief innovations jointly affected in different ways individual Eurozone banks’ stability (z-score) across six business models (BMs). We study this issue in the initial years when adaptation was most intense (2011–2014) and the Eurozone underwent a phase with sovereign crises abated by ECB policies easing financial conditions. In parallel, we run this exercise over 2000–2010 data, a time frame over which Basel 3 did not apply yet to see through the eyes of the regulator. Irrespective of BMs, we identify the leverage ratio as the most effective driver of banks’ stability. However, the impact on z-score of Basel 3 chief drivers does not seem to differ significantly on 2011–2014 vs. 2000–2010. Next, interactions with banks’ BMs suggest that Basel 3 innovations improve z-scores the most at traditionally focused banks (cooperative and savings banks), vis-à-vis diversified banks. Our results suggest Basel regulatory decisions were questionable. First, the front loading of the increased minimum capital requirements vs. the backloading of the leverage ratio phasing in may have lured banks from credit to financial assets. Second, our findings support the desirability of revising the current “one-size-fits-all” European prudential framework, which disregards BMs.</p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"18 4","pages":"429 - 456"},"PeriodicalIF":1.0,"publicationDate":"2022-03-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://link.springer.com/content/pdf/10.1007/s10436-021-00406-3.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43211427","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

引用次数: 0

A portfolio choice problem under risk capacity constraint 风险容量约束下的投资组合选择问题

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Annals of Finance Pub Date : 2022-01-31 DOI: 10.1007/s10436-021-00404-5

Weidong Tian, Zimu Zhu

引用次数: 2

Equilibrium pricing of commodity spot and forward under incomplete markets with implications on convenience yield 不完全市场下商品现货和远期均衡定价及其对便利收益的影响

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Annals of Finance Pub Date : 2022-01-17 DOI: 10.1007/s10436-021-00402-7

Katsushi Nakajima

引用次数: 0

Multi-stage real option evaluation with double barrier under stochastic volatility and interest rate 随机波动率和利率下双障碍的多阶段实物期权评估