Demand-based Asset Pricing: Theory, Estimation and Applications

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The first two chapters develop ML-based models that generate conditional SDF estimates efficiently using conditioning information sets, resulting in minimal pricing errors and superior Sharpe ratios compared to traditional conditional asset pricing models. ...

The optimal pricing of goods, especially when they are new and the innovating firm is a monopolist, must proceed without precise knowledge of the demand curve. This paper provides a pricing method with a relative robustness guarantee by maximizing a perfor ...

We study the effects of takeover feasibility on asset prices and returns in a unified framework. We show theoretically that takeover protections increase equity risk, stock returns, and bond yields by removing a valuable put option to sell the firm, notabl ...

Using data on international equity portfolio allocations by U.S. mutual funds, we estimate a portfolio expression derived from a standard mean-variance portfolio model extended with portfolio frictions. The optimal portfolio depends on the previous month a ...

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This paper reviews the mortgage-backed securities (MBS) market, with a particular emphasis on agency residential MBS in the United States. We discuss the institutional environment, security design, MBS risks and asset pricing, and the economic effects of m ...

Traditional competitive markets do not account for negative externalities; indirect costs that some participants impose on others, such as the cost of over-appropriating a common-pool resource (which diminishes future stock, and thus harvest, for everyone) ...

The COVID-19 pandemic has demonstrated the importance and value of multi-period asset allocation strategies responding to rapid changes in market behavior. In this article, we formulate and solve a multi-stage stochastic optimization problem, choosing the ...

This thesis examines how banks choose their optimal capital structure and cash reserves in the presence of regulatory measures. The first chapter, titled Bank Capital Structure and Tail Risk, presents a bank capital structure model in which bank assets ...

Oligopolistic competition occurs in various transportation markets. In this paper, we introduce a framework to find approximate equilibrium solutions of oligopolistic markets in which demand is modeled at the disaggregate level using discrete choice models ...

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Classical theory asserts that the formation of prices is the result of aggregated decisions of economics agent such as households or corporation. However central banks are very important agents that have often been neglected in asset pricing models. Centra ...

We propose a new asset pricing framework in which all securities' signals predict each individual return. While the literature focuses on securities' own-signal predictability, assuming equal strength across securities, our framework includes cross-predict ...

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Due to its enormous size and capital base, the insurance industry has the potential to play a key role in countering climate change. To this end, the major capital flows associated with its investment and underwriting businesses would need to be redirected ...

We present a general framework for portfolio risk management in discrete time, based on a replicating martingale. This martingale is learned from a finite sample in a supervised setting. Our method learns the features necessary for an effective low-dimensi ...

This thesis consists of three applications of machine learning techniques to empirical asset pricing. In the first part, which is co-authored work with Oksana Bashchenko, we develop a new method that detects jumps nonparametrically in financial time series ...

An overlapping generations model with investors having heterogeneous investment horizons leads to a two-factor asset pricing model. The risk premiums are determined by the exposure to the market (myopic betas) and the future return on the efficient portfol ...

The replicating portfolio (RP) approach to the calculation of capital for life insurance portfolios is an industry standard. The RP is obtained from projecting the terminal loss of discounted asset–liability cash flows on a set of factors generated by a fa ...

Demand-based Asset Pricing: Theory, Estimation and Applications

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