**The Center performs and disseminates research on the most important and pressing issues in risk and portfolio management in financial markets.**

### Who we are

### Site News

### CDAR website

The Consortium for Data Analytics in Risk (CDAR) is an industry partnership working in close collaboration with the Risk Center, and funded by State Street Bank and Trust. The CDAR website went live on 8/28/15.

### Yuriy Gorodnichenko and Michael Weber

Yuriy Gorodnichenko and Michael Weber’s Risk Center working paper, “Are Sticky Prices Costly? Evidence from the Stock Market” has been published by the American Economic Review, available here.

### Presentations and Speaking Engagements

### Alex Shkolnik will present “Systemic Risk in the Repo Market” at the upcoming Consortium for Systemic Risk Meeting (CSRA) December 15th Meeting

**Alex Shkolnik** presented “Systemic Risk in the Repo Market” at the Consortium for Systemic Risk Meeting (CSRA) on December 15th, 2015

### Samim Ghamami will present “Static Models of Central Counterparty Risk” at the upcoming “Regulating Systemic Risk: Insights from Mathematical Modeling” workshop at the Isaac Newton Institute for Mathematical Sciences at University of Cambridge from December 15th to December 19th

**Samim Ghamami** presented “Static Models of Central Counterparty Risk” at the upcoming “Regulating Systemic Risk: Insights from Mathematical Modeling” workshop at the Isaac Newton Institute for Mathematical Sciences at University of Cambridge between December 15th and December 19th, 2015

### Northfield Conference Speaker: Lisa Goldberg Date: October 8 “What Would Yale Do if it Were Taxable”

**Northfield Conference
Speaker: Lisa Goldberg
Date: **October 8, 2015

“What Would Yale Do if it Were Taxable”

### Stanford University Speaker: Lisa Goldberg Date: November 5 Center for Financial and Risk Analytics Seminar “Futures Financing Rates”

**Stanford University**

**Speaker: Lisa Goldberg
Date:** November 5, 2015

Center for Financial and Risk Analytics Seminar

“Futures Financing Rates”

### Global Derivatives USA Speaker: Lisa Goldberg Date: November 17 “On a Convex Measure of Drawdown Risk”

**Global Derivatives USA**

**Speaker: Lisa Goldberg
Date**: November 17, 2015

“On a Convex Measure of Drawdown Risk”

### Samim Ghamami’s – “Efficient Monte Carlo Counterparty Credit Risk Pricing and Measurement” to appear in the September issue of Journal of Credit Risk.

Samim Ghamami’s – “Efficient Monte Carlo Counterparty Credit Risk Pricing and Measurement” appeared in the September 2015 issue of *Journal of Credit Risk*.

### Ola Mahmoud presents “On a Convex Measure of Drawdown Risk” at the 5th Conference on Advances in Financial and Insurance Risk Management organized by the Center for Quantitative Risk Analysis (CEQURA) of Ludwig-Maximilians-University Munich, October 1st, Munich.

Ola Mahmoud presented “On a Convex Measure of Drawdown Risk” at the 5th Conference on Advances in Financial and Insurance Risk Management organized by the Center for Quantitative Risk Analysis (CEQURA) of Ludwig-Maximilians-University Munich, October 1st, 2014 Munich.

### Samim Ghamami presents “Static Models of Central Counterparty Risk” and will be a panel discussion participant on counterparty credit risk at the Quant Congress USA – July 16-18 2014, New York.

Samim Ghamami presented “Static Models of Central Counterparty Risk” and was a panel discussion participant on counterparty credit risk at the Quant Congress USA– July 16-18 2014, New York.

### Lisa discusses the Monty Hall problem on Numberphile, a mathematical YouTube series produced by British filmmaker Brady Haran. A follow-up video featuring Brady adds to the discussion.

Director of Research Lisa Goldberg featured in a Numberphile Video on the Monty Hall Problem

Wednesday, May 28, 2014

Lisa discussed the Monty Hall problem on Numberphile, a mathematical YouTube series produced by British filmmaker Brady Haran. A follow-up video featuring Brady adds to the discussion.

### Ola Mahmoud is presenting “On a Convex Measure of Drawdown Risk” (joint with Lisa Goldberg) at the Fifth International Conference on Mathematics in Finance held at Kruger National Park South Africa, August 2014

Ola Mahmoud presented “On a Convex Measure of Drawdown Risk” (joint with Lisa Goldberg) at the Fifth International Conference on Mathematics in Finance held at Kruger National Park South Africa, August 2014

### Newest Working Papers

### Comparative Statics in Finite Horizon Finance Economies with Stochastic Taxation

**Comparative Statics in Finite Horizon Finance Economies with Stochastic Taxation
**Konstantin Magin

### Examining US REITs Pricing Bubbles: An Application of the CCAPM with Stochastic Taxation and Money Supply

**Examining US REITs Pricing Bubbles: An Application of the CCAPM with ****Stochastic Taxation and Money Supply
**Robert H. Edelstein and Konstantin Magin

This paper examines three issues relating to US REITs pricing. First, using a modified Consumption Capital Asset Pricing Model (CCAPM) with stochastic taxation and money supply, we compute the fundamental values for United States Real Estate Investment Trusts (REITs) for our data sample, 1972-2013. Our empirical analysis for US REIT pricing is statistically consistent with the CCAPM with stochastic taxation and monetary policy. Second, for our purposes, for publicly traded equity REITs, we define a bubble at a point in time to be the difference between the actual stock market price and the fundamental value derived from our theoretical model. United States REITs have, among other corporate structural features, special rules governing dividend distributions and corporate taxation treatment that make them an especially attractive and preferred vehicle for testing for the presence of pricing bubbles. Our study suggests that during the sample time horizon, United States REITs experienced many price bubbles, some of which were quite large. Third, our empirical results imply that monetary policy, in the short run, plays a role in the formation of these pricing bubbles. more…

### Infinite Horizon CCAPM with Stochastic Taxation and Monetary Policy

**Infinite Horizon CCAPM with Stochastic Taxation and Monetary Policy
**Konstantin Magin

This paper derives the infinite horizon CCAPM with heterogeneous agents, stochastic dividend taxation and monetary policy. I find that under reasonable assumptions on assets’ dividends and probability distributions of the future dividend taxes and consumption, the model implies the constant price/after-tax dividend ratios. I also obtain that the higher current and expected dividend tax rates imply lower current asset prices. Finally, contrary to popular belief, monetary policy is neutral, in the long run, with respect to the real equilibrium asset prices. more…

### Generic Existence of Equilibria in Finite Horizon Finance Economies with Stochastic Taxation

**Generic Existence of Equilibria in Finite Horizon Finance Economies with Stochastic Taxation
**Konstantin Magin

The paper proves the existence of equilibria in the finite horizon general equilibrium with incomplete markets (GEI) model with insecure property rights. Insecure property rights come in the form of the stochastic taxes imposed on agents’ endowments and assets’ dividends. This paper finds that under reasonable assumptions, Financial Markets (FM) equilibria exist for most of the stochastic tax rates. Moreover, sufficiently small changes in stochastic taxation preserve the existence and completeness of FM equilibria. more…

### Understanding Systematic Risk: A High-Frequency Approach

**Understanding Systematic Risk: A High-Frequency Approach
**Markus Pelger

Under a large dimensional approximate factor model for asset returns, I use high-frequency data for the S&P 500 firms to estimate the latent continuous and jump factors. I estimate four very persistent continuous systematic factors for 2007 to 2012 and three from 2003 to 2006. These four continuous factors can be approximated very well by a market, an oil, a finance and an electricity portfolio. The value, size and momentum factors play no significant role in explaining these factors. For the time period 2003 to 2006 the finance factor seems to disappear. There exists only one persistent jump factor, namely a market jump factor. Using implied volatilities from option price data, I analyze the systematic factor structure of the volatilities. There is only one persistent market volatility factor, while during the financial crisis an additional temporary banking volatility factor appears. Based on the estimated factors, I can decompose the leverage effect, i.e. the correlation of the asset return with its volatility, into a systematic and an idiosyncratic component. The negative leverage effect is mainly driven by the systematic component, while it can be non-existent for idiosyncratic risk. more…

### Large-Dimensional Factor Modeling Based on High-Frequency Observations

**Large-Dimensional Factor Modeling Based on High-Frequency Observations
**Markus Pelger

This paper develops a statistical theory to estimate an unknown factor structure based on financial high-frequency data. I derive a new estimator for the number of factors and derive consistent and asymptotically mixed-normal estimators of the loadings and factors under the assumption of a large number of cross-sectional and high-frequency observations. The estimation approach can separate factors for normal “continuous” and rare jump risk. The estimators for the loadings and factors are based on the principal component analysis of the quadratic covariation matrix. The estimator for the number of factors uses a perturbed eigenvalue ratio statistic. The results are obtained under general conditions, that allow for a very rich class of stochastic processes and for serial and cross-sectional correlation in the idiosyncratic components. more…