Dynamic Hedging and Extreme Asset Co-movements
研究了市场下跌时资产共同运动增强对投资组合配置的影响，发现极端共同运动导致组合大幅转向无风险资产，且考虑极端事件依赖性能带来显著经济收益。
The paper investigates the portfolio allocation effects of increased asset co-movements during market downturns. We develop a model for the stock price process that allows for increased and asymmetric dependence between extreme return realizations. We isolate the portfolio hedging demands that arise due to extreme co-movements and find a substantial shift of the portfolio holdings toward the risk-free asset. We demonstrate that accounting for dependence between extreme events in portfolio decisions leads to significant economic gains that stem primarily from intertemporal hedging motives. These findings are robust along alternative modeling assumptions of extreme co-movements and conditional correlation.