THE DANCE ON THE EDGE: A KALMAN-FILTERED MODEL OF CREDIT SPREADS
ANGELO CORELLI
ABSTRACT
The evidence on the relationship between observed spreads and their theoretical determinants is mixed. Using principal components analysis, Colin Dufresne et al. (2001) find that changes in individual bond spreads are driven by a single common systematic factor, unaccounted for by theoretical variables. A stream of recent literature demonstrates that credit risk accounts for a minor portion of spreads, with most variation due to alternative risk factors or a risk premium similar to that in the equity markets. A significant portion of spread levels has attributed to the positive difference between tax rates on corporate and treasury bonds.

 Lauren Cohen and Breno Schmidt

We document a new, economically large, and growing channel, for attracting assets under management: namely the 401(k) market.  In 2004, nearly 40% of all mutual fund assets were held by Defined Contribution Plans and Individual Retirement Accounts. This percentage is steadily increasing largely because these retirement accounts represent the majority of new flows into non-money market mutual funds (60% in 2004).  With such a large and growing percentage of their assets coming from retirement accounts, mutual funds are likely to be interested in securing these big clients. Previous literature on the agency problems associated with increasing funds under management has concentrated on the flow performance relationship. In this paper we examine a new channel through which mutual fund families can attract assets: by becoming the trustee of a 401(k) plan.
 

The StressVaR: A New Risk Concept for uperior Fund Allocation

Cyril Coste, Raphaël Douady, Ilija I. Zovko

Summary
In this paper we introduce a novel approach to risk estimation based on nonlinear factor models the ”StressVaR” (SVaR). Developed to evaluate the risk of hedge funds, the SVaR appears to be applicable to a wide range of investments. The computation of the StressVaR is a 3 step rocedure whose main components we describe in relative detail. Its principle is to use the fairly short and sparse history of the hedge fund returns to identify relevant risk factors among  very broad set of possible risk sources.

Geography and Local (Dis)advantage: Evidence from Muni Bond Funds

Summary
The combination of geographic and economic data has provided increasingly useful evidence to explain the dynamics of information exchange across spatially distinct areas.