Simon Polbennikov
| Date of Ph.D. defense: | 18 November, 2005 |
| Title of thesis: | Modelling of and Empirical Studies on Portfolio Choice, Option Pricing, and Credit Risk |
| ISBN: | 90 5668 152 4 |
| Promotor: | Prof.dr. Bertrand Melenberg |
Abstract: Full text
This thesis develops and applies a statistical spanning test for mean-coherent
regular risk portfolios. Similarly in spirit to Huberman and Kandel (1987),
this test can be implemented by means of a simple semi-parametric instru-
mental variable regression, where instruments have a direct link with a sto-
chastic discount factor. Applications to different asset classes are studied.
The results are compared to the conventional mean-variance approach.
The second part of the thesis concerns option pricing under stochastic volatil-
ity and credit risk modelling. It is shown that modelling dynamics of the im-
plied prices of volatility risk can improve out-of-sample option pricing per-
formance. Finally, an equity-based structural model of credit risk with a
constant elasticity of volatility assumption is discussed. This model might
be particularly suitable for analysis of high yield fixed income instruments,
where correlation between credit spreads and equity returns is substantial.
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