In recent years, credit risk has played a key role in risk management issues. Practitioners, academics and regulators have been fully involved in the process of developing, studying and analysing credit risk models in order to find the elements which characterize a sound risk management system. In this paper we present an integrated model, based on a reduced pricing approach, for market and cre...

We explore a global game model of the impact of monetary policy shocks. Risk-neutral asset managers interact with risk-averse households in a market with a risky bond and a ‡oating rate money market fund. Asset managers are averse to coming last in the ranking of short-term performance. This friction injects a coordination element in asset managers’ portfolio choice that leads to large jumps in...

We provide a model with overconfident risk neutral investors in which (i) low book-to-market firms have high betas but on average earn low returns; (ii) a factor-mimicking portfolio such as HML earns positive expected returns; (iii) such a portfolio loads on fundamental macroeconomic variables; (iv) the loadings of securities on such portfolios positively forecast cross-sectional future returns...

Electricity generators in most deregulated markets simultaneously operate in both financial (contract) and physical (spot) markets. Decisions in each of these markets are not mutually exclusive, and in the case of imperfectly competitive scenarios generating companies can use their market power to influence spot and contract prices. A model of oligopolistic market equilibrium is presented where...

In illiquid markets, option traders may have an incentive to increase their portfolio value by using their impact on the dynamics of the underlying. We provide a mathematical framework within which to value derivatives under market impact in a multi-player framework by introducing strategic interactions into the Almgren & Chriss (2001) model. Speci cally, we consider a nancial market model with...

In a standard financial market model with asymmetric information with a finite number N of risk-averse informed traders, competitive rational expectations equilibria provide a good approximation to strategic equilibria as long as N is not too small: equilibrium prices in each situation converge to each other at a rate of 1/N as the market becomes large. The approximation is particularly good wh...

Based on the uncertainty theory, market demand information updating as the background, we study the coordination and optimization problem of three-stage supply chain in this paper. In half a asymmetric market information, participants are risk neutral; under the situation of the manufacturers and wholesalers having twice pre-season decision-making opportunity, wholesalers can be replenished in ...

Algorithmic asset management refers to the use of expert systems that enter trading orders without any user intervention. In particular, market-neutral systems aim at generating positive returns regardless of underlying market conditions. In this chapter we describe an incremental learning framework for algorithmic asset management based on support vector regression. The algorithm learns the fa...

A market with asymmetric information can be viewed as a repeated exchange game between the informed sector and the uninformed one. In a market with risk-neutral agents, De Meyer [2010] proves that the price process should be a particular kind of Brownian martingale called CMMV. This type of dynamics is due to the strategic use of their private information by the informed agents. In the current ...