Simone Farinelli

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We propose two structural models for stochastic loss given default that allow the credit losses of a portfolio of defaultable financial instruments to be modeled. The credit losses are integrated into a structural model of default events accounting for correlations between the default events and the associated losses. We show how the models can be(More)
Eling and Schuhmacher (2007) compared the Sharpe ratio with other performance measures and found virtually identical rank ordering using hedge fund data. They conclude that the choice of performance measure has no critical influence on fund evaluation and that the Sharpe ratio is generally adequate for analyzing hedge funds. Nevertheless, their analysis(More)
In this work, we identify the most general measure of arbitrage for any market model governed by Itô processes. We show that our arbitrage measure is invariant under changes of numéraire and equivalent probability. Moreover, such measure has a geometrical interpretation as a gauge connection. The connection has zero curvature if and only if there is no(More)
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