We study the optimal design of a menu funds by manager who is required to use linear pricing and does not observe beliefs investors regarding one risky assets. The involves bundling assets can be constructed from solution calculus variations problem that optimizes over indirect utility each type receives. provide complete characterization show need maintain incentive compatibility leads offer a...

Using data on security holdings of 10,771 institutional investors from 72 different countries, we test whether concentrated investment strategies result in superior abnormal returns to institutional investors. We examine three measures of portfolio concentration: home country, foreign country, and industry concentration and show that portfolio concentration leads to higher abnormal returns of i...

This paper surveys some recent developments in the theory of capital markets. Particular emphasis is given to two strands of the literature. The rst covers some recent and fundamental extensions to the theory of risk aversion and the demand for risky assets. These papers are concerned with the e ect of nonhedgeable background risk on risk attitudes. The important implications for nance are for ...

Abstract. Utility indifference pricing and hedging theory is presented, showing how it leads to linear or to non-linear pricing rules for contingent claims. Convex duality is first used to derive probabilistic representations for exponential utility-based prices, in a general setting with locally bounded semi-martingale price processes. The indifference price for a finite number of claims gives...

Ambivalence in the regulatory definition of capital adequacy for credit risk has recently steered the financial services industry to collateral loan obligations (CLOs) as an important balance sheet management tool. CLOs represent a specialised form of Asset-Backed Securitisation (ABS), with investors acquiring a structured claim on the interest proceeds generated from a portfolio of bank loans ...

The term ‘no-good-deal pricing’ in this paper encompasses pricing techniques based on the absence of attractive investment opportunities – good deals – in equilibrium. We borrowed the term from [8] who pioneered the calculation of price bands conditional on the absence of high Sharpe Ratios. Alternative methodologies for calculating tighter-than-no-arbitrage price bounds have been suggested by ...

In a previous study, Barro (2006), I used the Thomas A. Rietz (1988) idea of rare economic disasters to explain the equity premium and related asset-pricing puzzles. My quantitative examination of large macroeconomic contractions in 35 countries during the twentieth century suggested a disaster probability of roughly 2 percent per year. The size distribution of GDP contractions during these eve...

My dissertation studies the impact of economic linkages among market participants on equilibrium outcomes such as asset prices and returns as well as investors’ welfare. The first essay—titled “Inter-firm Relationships and Asset Prices”—studies the asset pricing properties that stem from the propagation of shocks within a network economy and the extent to which such a propagation mechanism quan...

This paper studies a representative-agent asset-pricing model of an endowment economy in which the agent has incomplete knowledge about exogenous stochastic endowment process and has incentive to learn about the process with adaptive learning rules. There is the well documented fact that when underlying economic environment is known and is common knowledge to investors, asset-pricing models und...