Modelling of and empirical studies on portfolio choice, option pricing, and credit risk

S.Y. Polbennikov

Research output: ThesisDoctoral Thesis

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This thesis develops and applies a statistical spanning test for mean-coherent regular risk portfolios. Similarly in spirt to Huberman and Kandel (1987), this test can be implemented by means of a simple semi-parametric instrumental variable regression, where instruments have a direct link with a stochastic 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 volatility and credit risk modelling. It is shown that modelling dynamics of the implied prices of volatility risk can improve out-of-sample option pricing performance. 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.
Original languageEnglish
QualificationDoctor of Philosophy
Awarding Institution
  • Tilburg University
  • Melenberg, Bertrand, Promotor
Award date18 Nov 2005
Place of PublicationTilburg
Print ISBNs9056681524
Publication statusPublished - 2005


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