Carole Bernard

• Grenoble Ecole de Management

Green bonds direct financial resources towards environmentally friendly projects. This paper estimates the greenium, defined as the yield difference between a green bond and its non-green counterpart, in the US municipal market. Using the Nelson-Siegel model, we generate a sequence of model-based time series greeniums for each tenor of the interest...

This paper shows that one needs to be careful when making statements on potential links between correlation and coskewness. Specifically, we first show that, on the one hand, it is possible to observe any possible values of coskewness among symmetric random variables but zero pairwise correlations of these variables. On the other hand, it is also p...

This study conducts an optimal surrender analysis of reverse mortgage (RM) loans offered to elderly homeowners as a financing option. Recent market evidence on borrower early surrenders has raised concerns about the marketability of RM products and their impact on the program viability. In this article, we derive the borrower optimal surrender stra...

This paper studies the relationship between blockchain patents and firms' environmental and social performance. Using data from USPTO, we assess the effect of these patents on subcategories and aggregate grades for social and environmental dimensions. Our results show a negative main effect of blockchain‐related patents on social and environmental...

In this paper, we focus on the certification cost for green bonds to understand the decision rationale of issuers when it comes to getting certified. We find that if this cost is null, requesting a certification is always optimal for the issuers, no matter the outcome of the process. However, with a strictly positive cost, we show the existence of...

This paper studies the relationship between blockchain patents and firms' environmental and social performance. Using data from USPTO, we assess the effect of these patents on subcategories and aggregate grades for social and environmental dimensions. Our results show a negative main effect of blockchain-related patents on social and environmental...

We propose a novel model-free approach to obtain the joint risk-neutral distribution among several assets that is consistent with options on these assets and their weighted index. We implement this approach for the nine industry sectors comprising the S&P 500 index and find that their option-implied dependence is highly asymmetric and time-varying....

We study the impact of dependence uncertainty on the expectation of the product of $d$ random variables, $\mathbb{E}(X_1X_2\cdots X_d)$ when $X_i \sim F_i$ for all~$i$. Under some conditions on the $F_i$, explicit sharp bounds are obtained and a numerical method is provided to approximate them for arbitrary choices of the $F_i$. The results are app...

We perform a simultaneous test for several rational and behavioral factors known to affect the uptake of life annuities in a sample of Americans. We also investigate whether analysts’ short-term stock market expectations affect the decision to annuitize retirement wealth. We find that facing such expectations without trusting them lowers the purcha...

We propose a novel model-free approach for extracting the risk-neutral quantile function of an asset using options written on this asset. We develop two applications. First, we show how for a given stochastic asset model our approach makes it possible to simulate the underlying terminal asset value under the risk-neutral probability measure directl...

Agents who pursue optimal portfolio choice by optimizing a univariate objective (e.g., an expected utility) obtain optimal payoffs that are increasing with each other (situation of no diversification). This situation may lead to an undesirable level of systemic risk for society. A regulator may consider a global perspective and aim to enforce diver...

Although a few systemic risk management approaches have been proposed in the literature and implemented in industry, such as stress test-based scenarios, the impact of such regulations remains unclear. In this paper, we present a theoretical framework to study the impact of systemic risk management on financial institutions’ optimal wealth policies...

This paper studies the topic of cost-efficiency in incomplete markets. A portfolio payoff is called cost-efficient if it achieves a given probability distribution at some given investment horizon with a minimum initial budget. Extensive literature exists for the case of a complete financial market. We show how the problem can be extended to incompl...

In this paper we study $L_p$-norm spherical copulas for arbitrary $p \in [1,\infty]$ and arbitrary dimensions. The study is motivated by a conjecture that these distributions lead to a sharp bound for the value of a certain generalized mean difference. We fully characterize conditions for existence and uniqueness of $L_p$-norm spherical copulas. Ex...

In this paper we propose a robust assessment for the net premium of a standard life insurance contract with respect to the uncertainty on the estimated residual lifetime distribution function. Specifically, we provide a method to derive the range of values that the net premium of a given contract can attain when considering all residual lifetime di...

In this note, we point out a mistake in Theorem 1 of De De Gennaro Aquino and Bernard (Decis Econ Finance 42(2):715–741, 2019) and provide some missing references where the problem of pricing barrier options under the Heston model had previously been discussed.

The assessment of portfolio risk is often explicitly (e.g., the square root formula under Basel III) or implicitly (e.g., credit risk portfolio models) driven by the marginal distributions of the risky components and the correlations amongst them. We assess the extent by which such practice is prone to model error. In the case of a sum of n = 2 ris...

Reverse mortgages are designed to offer additional sources of financing incomes to senior homeowners. In the United States, home equity conversion mortgages (HECMs) are nonrecourse reverse mortgage loans insured by the Federal Housing Administration (FHA). Based on a fairly recent stream of the reverse mortgage literature, the relatively high loan-...

We show that when asset returns satisfy a location-scale property (possibly conditionally as e.g. for a multivariate generalized hyperbolic distribution) and the investor has law-invariant and increasing preferences, the optimal investment portfolio always exhibits two-fund or three-fund separation. As a consequence, we recover many of the three-fu...

Using neural networks, we compute bounds on the prices of multi-asset derivatives given information on prices of related payoffs. As a main example, we focus on European basket options and include information on the prices of other similar options, such as spread options and/or basket options on subindices. We show that, in most cases, adding furth...

The energy distance and energy scores became important tools in multivariate statistics and multivariate probabilistic forecasting in recent years. They are both based on the expected distance of two independent samples. In this paper we study dependence uncertainty bounds for these quantities under the assumption that we know the marginals but do...

Robustness of risk measures to changes in underlying loss distributions (distributional uncertainty) is of crucial importance when making well-informed risk management decisions. In this paper, we quantify for any given distortion risk measure its robustness to distributional uncertainty by deriving its range of attainable values when the underlyin...

We study the robustness of the results of Milevsky and Huang (2018) on the optimal demand for annuities to the choice of the utility function. To do so, we first propose a new way to span the set of all increasing concave utility functions by exploiting a one-to-one correspondence with the set of probability distribution functions. For example, thi...

The energy distance and energy scores became important tools in multivariate statistics and multivariate probabilistic forecasting in recent years. They are both based on the expected distance of two independent samples. In this paper we study dependence uncertainty bounds for these quantities under the assumption that we know the marginals but do...

We show that when asset returns satisfy a location-scale property (possibly conditionally as e.g., for a multivariate generalized hyperbolic distribution) and the investor has law-invariant and increasing preferences, the optimal investment portfolio always exhibits two-fund or three-fund separation. As a consequence, we recover many of the three-f...

Using neural networks, we compute bounds on the prices of multi-asset derivatives given information on prices of related payoffs. As a main example, we focus on European basket options and include information on the prices of other similar options, such as spread options and/or basket options on subindices. We show that, in most cases, adding furth...

Under the Heston stochastic volatility model, we derive semi-analytical formulas for the prices of path-dependent options with payoffs linked to the maximum or minimum value of the underlying asset price over a certain period of time. In particular, we obtain prices of lookback and barrier options in the Heston model, but the methodology applies mo...

In the United States, variable annuities (VAs) are popular long-term personal investment vehicles. Recently, however, sales have begun to dwindle. In fact, financial advisers have long argued against investing in VAs due to the products’ high fees. VA providers charge these fees—typically at a constant rate throughout the policy period—to cover the...

Under a correlation constraint the optimal constant/fixed-mix portfolio consists of the market portfolio, the riskless bond and the benchmark

Catastrophe aversion and risk equity are important concepts both in risk management theory and practice. Keeney [Keeney RL (1980) Equity and public risk. Oper. Res. 28(3):527–534] was the first to formally define these concepts. He demonstrated that the two concepts are always in conflict. Yet his result is based on the assumption that individual r...

Path-dependent derivatives are typically difficult to hedge. Traditional dynamic delta hedging does not perform well because of the difficulty to evaluate the Greeks and the high cost of constantly rebalancing. We propose to price and hedge path-dependent derivatives by constructing simplified alternatives that preserve certain distributional prope...

We study properties of the Rearrangement Algorithm (RA) in the context of inferring dependence among variables given their marginal distributions and the distribution of the sum. We show that the RA yields solutions that are “close to each other” and exhibit almost maximum entropy. The consequence of this result is that the RA can be used as a stab...