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Asset Pricing with a CEO
with Paul Ehling and Alessandro Graniero | 2020
Abstract: We study an economy with a CEO who trades off the incentive to divert funds, which leads to underinvestment, against the incentive to overinvest based on his optimism. In equilibrium, we see overinvestment relative to what the shareholder or a social planner would implement but underinvestment relative to what the optimistic CEO would implement if there were no feedback between real investment and asset prices. For large wealth shares, the CEO's welfare is higher under a social planner where no funds can be diverted. For small wealth shares, overinvestment peaks and the real short-rate and Tobin's q decline.
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Equilibrium Asset Pricing in Directed Networks
with Nicole Branger, Christoph Meinerding, and Christian Schlag
Review of Finance, 2021, 25(3), 777-818.
DOI: https://doi.org/10.1093/rof/rfaa035 | Online Appendix | |
SAFE Working Paper No. 74 |
Bundesbank Discussion Paper No. 37/2018
Abstract: Directed links in cash flow networks affect the cross-section of risk premia through three channels. In a tractable consumption-based equilibrium asset pricing model, we obtain closed-form solutions that disentangle these channels for arbitrary directed networks. First, shocks that can propagate through the economy command a higher market price of risk. Second, shock-receiving assets earn an extra premium since their valuation ratios drop upon shocks in connected assets. Third, a hedge effect pushes risk premia down: when a shock propagates through the economy, an asset that is unconnected becomes relatively more attractive and its valuation ratio increases.
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Optimists and Pessimists in (In)Complete Markets
with Nicole Branger and Christian Schlag
Journal of Financial and Quantitative Analysis, 2020, 55(8), 2466-2499.
DOI: https://doi.org/10.1017/S002210901900070X | Online Appendix | |
SAFE Working Paper No. 252
Abstract: We study the effects of market incompleteness on speculation, investor survival, and asset pricing moments, when investors disagree about the likelihood of jumps and have recursive preferences. We consider two models. In a model with jumps in aggregate consumption, incompleteness barely matters, since the consumption claim resembles an insurance product against jump risk and effectively reproduces approximate spanning. In a long-run risk model with jumps in the long-run growth rate, market incompleteness affects speculation, and investor survival. Jump and diffusive risks are more balanced regarding their importance and, therefore, the consumption claim cannot reproduce approximate spanning.
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Asset Allocation in Markets with Contagion: The Interplay between Volatilities, Jump Intensities, and Correlations
with Christoph Meinerding and Olga Sedova
Review of Financial Economics, 2013, 22(1), 36-46.
DOI: https://doi.org/10.1016/j.rfe.2012.08.001 |
Abstract: We study the impact of financial contagion on the dynamic asset allocation problem of a CRRA investor facing an incomplete market with two risky assets. We apply a Markov chain regime-switching framework with state-dependent jump intensities, diffusion volatilities and diffusion correlations. The key model feature that a switch to the bad contagion regime is triggered by a loss in one of the risky assets allows for the implementation of a hedging demand against contagion risk. Moreover, a state-dependent diffusion correlation combined with heterogeneity in jump intensities and volatilities can, e.g., generate a flight to quality effect upon a systemic jump.
| Spring 2023 | GRA 6547 Research Methodology in Finance (M.Sc.) Course Description |
| Spring 2022 | GRA 6547 Research Methodology in Finance (M.Sc.) |
| Autumn 2021 | FIN 3618 Financial Econometrics (B.Sc.) |
| Spring 2021 | GRA 6547 Research Methodology in Finance (M.Sc.) |
| Autumn 2020 | FIN 3618 Financial Econometrics (B.Sc.) |
| Spring 2020 | GRA 6547 Research Methodology in Finance (M.Sc.) |
| Autumn 2019 | FIN 3618 Financial Econometrics (B.Sc.) |
| Spring 2019 | GRA 6547 Research Methodology in Finance (M.Sc.) |
| Autumn 2018 | FIN 3618 Financial Econometrics (B.Sc.) |
| Spring 2018 | GRA 6547 Research Methodology in Finance (M.Sc.) |
| Autumn 2017 | FIN 3618 Financial Econometrics (B.Sc.) |
| Spring 2017 | GRA 6547 Research Methodology in Finance (M.Sc.) |
| Autumn 2016 | FIN 3618 Financial Econometrics (B.Sc.) |
| Spring 2016 | Derivatives II: Interest Rate Derivatives (Lecture & Tutorial, M.Sc.) |
| Seminar "Carry Trades" (M.Sc.) | |
| Seminar "MATLAB for Finance" (M.Sc.) | |
| Fall 2015 | Derivatives I: Equity Derivatives (Lecture & Tutorial, M.Sc.) |
| Spring 2015 | Derivatives II: Interest Rate Derivatives (Lecture & Tutorial, M.Sc.) |
| Fall 2014 | Derivatives I: Equity Derivatives (Tutorial, M.Sc.) |
| Seminar "MATLAB for Finance" (M.Sc.) | |
| Spring 2014 | Derivatives II: Interest Rate Derivatives (Tutorial, M.Sc.) |
| Fall 2013 | Principles of Financing (Tutorial, B.Sc.) |
| Spring 2013 | Derivatives II: Interest Rate Derivatives (Tutorial, M.Sc.) |
| Fall 2012 | Portfolio Planning and Asset Pricing (Tutorial, M.Sc.) |
| Principles of Financing (Tutorial, B.Sc.) | |
| Fall 2011 | Portfolio Planning and Asset Pricing (Tutorial, M.Sc.) |
| Seminar "International Finance" (M.Sc.) | |
| Principles of Financing (Tutorial, B.Sc.) | |
| Spring 2011 | Derivatives II: Interest Rate Derivatives (Tutorial, M.Sc.) |
| Principles of Financing (Tutorial, B.Sc.) | |
| Fall 2010 | Principles of Financing (Tutorial, B.Sc.) |