Systemic Influences on Optimal Equity-Credit Investment

• 成果类型: Article
• 署名作者: Capponi, Agostino; Frei, Christoph
• 署名单位: Columbia University; University of Alberta
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2016.2460
• 发表日期: 2017
• 页码: 2756-2771
• 关键词: optimal investment; Systemic risk; Credit Default Swaps; iterative calibration; portfolio monitoring

摘要

We introduce an equity-credit portfolio framework taking into account the structural interaction of market and credit risk, along with their systemic dependencies. We derive an explicit expression for the optimal investment strategy in stocks and credit default swaps (CDSs). We exploit its representation structure and analyze the mechanisms driving the optimal investment decisions. The transmission of market risk premia is the key mechanism through which systemic influences affect the optimal investment strategy. We develop a novel calibration procedure and find that systemic dependencies are statistically significant when the model is fitted to historical time series of equity and CDS data. An empirical analysis with data of companies in the Dow Jones Industrial Average 30 reveals the critical role of systemic risk in portfolio monitoring.