Extreme Asymmetric Volatility, Leverage, Feedback and Asset Prices.

Asymmetric volatility in equity markets has been widely documented in finance, where two competing explanations, as considered in Bekaert and Wu (2000), are the financial leverage and the volatility feedback hypothesis. We explicitly test for the role of both hypotheses in explaining extreme daily U.S. equity market movements during the period January 1990 to September 2008. To this aim, we examine asymmetric volatility based on a novel model of market returns, conditional market volatility and volatility of volatility. We then test for extreme asymmetry and the distinct predictions of both hypotheses. Our results document significant extreme asymmetric volatility. This effect is contemporaneous, consistent with both hypotheses, and it is important for large market declines. We further point out aggregate asset pricing implications under extreme volatility feedback.Market stress; Asymmetric volatility; Leverage effect; Effet de levier; Market volatility; Volatility feedback;

Systematic credit risk: CDX index correlation and extreme dependence.

Dependence is an important issue in credit risk portfolio modeling and pricing. We discuss a straightforward common factor model of credit risk dependence, which is motivated by intensity models such as Duffie and Singleton (1998), among others. In the empirical analysis, we study dependence under the risk-neutral measure using credit default swap (CDS) spread data of liquid large-cap U.S. obligors. The proxy for the commonfactor is the DJ CDX.NA.IG index. We document that (i) the CDX factor is significant but has low explanatory power, (ii) factor sensitivities show distinct time-varying nature and that (iii) systematic credit risk shows asymmetric extreme factor dependence, where extreme dependence is present for upward CDX movements only. This finding from an EVT-copula approach is what is predicted by various intensity models of joint defaults.Credit risk; Time-varying risk; Extreme dependence; Factor model;

Surprise volume and heteroskedasticity in equity market returns

Heterosedasticity in returns may be explainable by trading volume. We use different volume variables, including surprise volume - i.e. unexpected above-avergae trading activity - which is derived from uncorrelated volume innovations. Assuming eakly exogenous volume, we extend the Lamoureux and Lastrapes (1990) model by an asymmetric GARCH in-mean specification following Golstein et al. (1993). Model estimation for the U.S. as well as six large equity markets shows that surprise volume superior model fit and helps to explain volatility persistence as well as excess kurtosis. Surprise volume reveals a significant positive market risk premium, asymmetry, and a surprise volume effect in conditional variance. The findings suggest that, e.g., a surprise volume shock (breakdown) - i.e. large (small) contemporaneous and small (large) lagged surprise volume - relates to increased (decreased) conditional market variance and return. --ARCH,trading volume,return volume dependence,asymmetric volatility,market risk premium,leverage effect

Surprise Volume and Heteroskedasticity in Equity Market Returns

Heteroskedasticity in returns may be explainable by trading volume. We use different volume variables, including surprise volume---i.e. unexpected above-average trading activity---which is derived from uncorrelated volume innovations. Assuming weakly exogenous volume, we extend the Lamoureux and Lastrapes (1990) model by an asymmetric GARCH in-mean specification following Golsten et al. (1993). Model estimation for the U.S. as well as six large equity markets shows that surprise volume provides superior model fit and helps to explain volatility persistence as well as excess kurtosis. Surprise volume reveals a significant positive market risk premium, asymmetry, and a surprise volume effect in conditional variance. The findings suggest that, e.g., a surprise volume shock (breakdown)---i.e. large (small) contemporaneous and small (large) lagged surprise volume---relates to increased (decreased) conditional market variance and return.ARCH, trading volume, return volume dependence, asymmetric volatility, market risk premium, leverage effect

Nonlinear Term Structure Dependence: Copula Functions, Empirics, and Risk Implications

This paper documents nonlinear cross-sectional dependence in the term structure of U.S. Treasury yields and points out risk management implications. The analysis is based on a Kalman filter estimation of a two-factor affine model which specifies the yield curve dynamics. We then apply a broad class of copula functions for modeling dependence in factors spanning the yield curve. Our sample of monthly yields in the 1982 to 2001 period provides evidence of upper tail dependence in yield innovations; i.e., large positive interest rate shocks tend to occur under increased dependence. In contrast, the best fitting copula model coincides with zero lower tail dependence. This asymmetry has substantial risk management implications. We give an example in estimating bond portfolio loss quantiles and report the biases which result from an application of the normal dependence model.affine term structure models, nonlinear dependence, copula functions, tail dependence, value-at-risk

Stochastic modeling of private equity: an equilibrium based approach to fund valuation

In this paper, we present a new approach to measure the returns of private equity investments based on a stochastic model of the dynamics of a private equity fund. Our stochastic model of a private equity fund consists of two independent stages: the stochastic model of the capital drawdowns and the stochastic model of the capital distributions over a fund's lifetime. Capital distributions are assumed to follow lognormal distributions in our approach. A mean-reverting square-root process is applied to model the rate at which capital is drawn over time. Applying equilibrium intertemporal asset pricing consideration, we are able to derive closed-form solutions for the market value and time-weighted model returns of a private equity fund. --Private Equity Funds,Stochastic Modeling,Mean-Reverting Square-Root Process,Incomplete Markets

Managing investment risks of institutional private equity investors: The challenge of illiquidity

Since private equity investments are not publicly traded, a key issue in measuring investment risks of institutional private equity investors arises from a careful measurement of investment returns in the first place. Prices of private equity investments are typically observed at low frequency and are determined by transactions under low liquidity. This contribution highlights useful approaches to the problem of return measurement under conditions of illiquidity. Then, specific risk management issues, including asset allocation issues, are discussed. --private equity,risk/return measurement,net asset values,cash flows,illiquidity,stale pricing,risk management,asset allocation

Problems and perspectives concerning the human conjectural conceptions in cognitive - behavioral therapy

Indexación: Web of Science; ScieloActualmente, la psicología en tanto discurso científico y práctica positiva se encuentra en un estado epistemológicamente crítico. El análisis del estado actual de la discusión académica en la psicología cognitivo-conductual, la corriente teórico-práctica más representativa y más difundida en los estados europeos, devela que ésta frecuentemente es malentendida como un mero procedimiento técnico, un conjunto precariamente articulado de intervenciones operatorias, desentendidas de sus supuestos antropológicos subyacentes. Se propone examinar en qué medida la brecha entre reflexión teórica y práctica efectiva, una escisión ampliamente constatada, puede ser aminorada sometiendo a discusión el concepto de las Menschenbildannahmen, de extensa raigambre en el pensamiento antropológico.Nowadays psychology as a scientific discourse and a positive practice finds itself in an epistemologically critical situation. The analysis of the actual state of the academic discussion in cognitive-behavioural psychology, the most representative and widespread theoretical-practical trend in European nations, reveals that it frequently is misunderstood as a exclusively technical proceeding, an amount of deficiently articulated operatory interventions, alienated from its underlying anthropological assumptions. This paper proposes to exam how far the gap between theoretical reflection and effective practice, a cleavage frequently confirmed, may be reduced discussing the concept of Menschenbildannahmen, an idea firmly rooted in anthropological thinking.http://ref.scielo.org/kbw72