Andrea Buraschi

Imperial College London Business School

Chair in Finance



 

Finance Department
53 Prince's Gate
Office 4.08
London SW7 2AZ
T: +44 (0) 7860 800590
T: +44 (0) 20 7594 1818


 

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Andrea Buraschi’s research interests encompass five key areas:

      1.      Economic Uncertainty and Differences in Beliefs
2.      Term Structure, Monetary Policy and Derivative Markets
3.     
Hedge Funds and Agency Problems
4.     
General Equilibrium, Networks, and Asset Pricing
5.     
Portfolio Management


Uncertainty, Differences in Beliefs and Frictions:

In the area of economic uncertainty, Buraschi has studied the role of heterogeneity in beliefs on asset pricing. His theoretical and empirical work documents the existence of a link between differences in beliefs, derivatives trading, and the dynamics of expected excess returns in different financial markets (options, credit, bonds, and currencies)

Articles for download:

-       When Uncertainty Blows in the Orchard: Comovement and Equilibrium Volatility Risk Premia”, with Fabio Trojani and Andrea Vedolin. Journal of Finance, 2013 (forthcoming). (Download) (Slides) (Online Technical Appendix)

-       The Geography of Risk Capital, Review of Financial Studies, 2014 (forthcoming). (Download)

 -       Difference in Beliefs and Currency Risk Premia, with Alessandro Beber and Francis Breedon, 2010, Journal of Financial Economics 98, 415-438. Lead Article. (Download)(WP 2009 Download)

-       Model Uncertainty and Option Markets with Heterogeneous Beliefs, 2006, with Alexei Jiltsov, Journal of Finance 61, 2841-2897. (Download)(Wp 2005 Download)

-       Economic Uncertainty, Differences in Beliefs and Credit Spreads, with Fabio Trojani and Andrea Vedolin, Management Science, 2013 (forthcoming). (Download)(Online Technical Appendix)

-       Term Structure Models and Differences in Beliefs, with Paul Whelan, 2010. Winner of Q-Group Research Award 2010. Winner of Q-Group Research Award 2010. (Download) (Slides)

 

Terms Structure, Monetary Policy, and Derivative Markets:

In the area of fixed income and term structure odeling, Buraschi has been interested in understanding the role of monetary policy for the inflation risk premium and the dynamics of bond returns. In this area, one of his contributions was to document the importance of habit preferences to explain some stylized facts about bond risk premia. In the area of derivative markets, his early theoretical and empirical work was among the first to show evidence of a volatility risk premium in option returns using a semi-parametric approach. Another area of interest include the repo market and liquidity risk.

Articles for download:

-       Monetary Policy and Treasury Risk Premia, with Andrea Carnelli and Paul Whelan (2014). Winner of the Garp Best Paper Award in Financial Risk Management 2013. Presented at AFA 2013 (San Diego). (Download) (Internet Appendix) (Slides)

-     Habit formation and macroeconomic models of the term structure of interest rates, with Alexei Jiltsov, Journal of Finance, 2007, Vol: 62(6), Pages: 3009-3063. (Download)(WP 2003 Download)

-       Inflation Risk Premia and the Expectations Hypothesis: Taylor Monetary Policy Rules in Equilibrium Models, 2005, with Alexei Jiltsov, Journal of Financial Economics 75, 429-490. Winner ofWFA Award as Best Paper in Investments. (Download)(Wp 2004 Download)

-       Liquidity Risk and Specialness: How Well Do Forward Repo Spreads Price Future Specialness?”, 2002, with Davide Menini, Journal of Financial Economics 64, 243-282. (Download)


-       The Price of a Smile: Hedging and Spanning in Option Markets”, 2001, with Jens Jackwerth,Review of Financial Studies 14, 495-527. (Download) (An earlier version circulated under the title “Is Volatility Risk Priced in the Option Market” in 1999. (Download)

 

-       Believe It or Not: Taylor Rule Uncertainty”, with Andrea Carnelli and Paul Whelan, in Modern Macroeconomic Policy Making, 2013, by Cambridge University Press. (Download)
      

-       Correlation Risk and the Term Structure of Interest Rates”, with Anna Cieslak and FabioTrojani. Unpublished working paper. Presented at: WFA 2007, EFMA 2007, AEA 2008, EFA 2007.(Download)

 

Derivatives and Option Markets

-       The Forward Calculation of Compound Option Prices, 2001, with Bernard Dumas, Journal of Derivatives 9, 8-17. Lead Article. (Download)

 

-       Risk Management Implications of Time-Inconsistency: Model Updating and Recalibration of No-Arbitrage Models”, 2005, with Francesco Corielli, Journal of Banking and Finance 29, 2883-2907. Lead Article. (Download)

 

 

Hedge Funds:

In the area of hedge funds, Buraschi has worked on the performance evaluation of hedge fund strategies when the capital structure of the hedge fund is fragile and affected by non-linear incentives due to agency contracts. Moreover, some of his work shows that while long-short and risk-arbitrage strategies used by hedge funds may reduce market beta by reducing net-exposure, they can introduce a different dimension of risk that is linked to correlation risk. Models of performance attribution need to explicitly account for this dimension of risk.  

Articles for download:

-       Incentives and Endogenous Risk Taking: A Structural View of Hedge Fund Alphas, with R.Kosowski and W. Sritakul. Journal of Finance, 2013. (Download)(Slides)

 

-       When There is No Place to Hide: Correlation Risk and the Cross-Section of Hedge Funds Returns, with Robert Kosowski and Fabio Trojani. Winner of the Inquire UK 2009 Award. Review of Financial Studies (R/R 3rd). Accepted for presentation at: AFA2010, WFA 2011, Gerzensee Asset Pricing Meetings 2009. Winner of the Inquire UK 2009 Award. Review of Financial Studies, 2014, Vol. 27, 2, p581-616. (Download)



General Equilibrium, Networks, and Asset Pricing:

In the area of general equilibrium asset pricing, Buraschi has studied the asset pricing implications of heterogeneity, both in terms of heterogeneous beliefs and, more recently, in terms of network connectivity.

Articles for download:

-       When Uncertainty Blows in the Orchard: Comovement and Equilibrium Volatility Risk Premia”, with Fabio Trojani and Andrea Vedolin. Journal of Finance, 2013 (forthcoming). (Download) (Slides) (Online Technical Appendix)
 

-       The Economics of Donations and Enlightened Self-interest”, with Francesca Cornelli, 2013, European Financial Management, forthcoming. (Download)

-       Understanding Short versus Long-Run Risk Premia”, with Andrea Carnelli, 2013, European Financial Management, forthcoming. (Download)

 

-       The Geography of Risk Capital and Limits to Arbitrage”, with M. Menguturk and E. Sener, 2013, Fama-Miller Center Papers,  N. 13-44. Review of Financial Studies (R/R). (Download)(Slides)
 

-       Dynamic Networks and Asset Pricing”, with Paolo Porchia (2012). Winner of the NYSE Euronext Financial Markets Best Paper Award 2012. Under Submission.  Presented: EFA 2012 (Copenhagen), EFMA 2012 (Barcellona), AFA 2013 (San Diego). (Download) (Slides)



Portfolio Management:

In the area of portfolio management, Buraschi has studied the importance of correlation risk in optimal portfolio choice; his work has also discussed the economic value of predictability in portfolio management. 


Articles for download:

-       Correlation Risk and Optimal Portfolio Choice, 2010, with Paolo Porchia and Fabio Trojani,Journal of Finance 65, 392-420.  Winner of the Inquire Europe Best Paper Award. (Download)(Wp 2006 Download)(Online Technical Appendix)

-       The Economic Value of Predictability for Portfolio Management, with Andrea Carnelli, The Journal of Financial Management, Markets and Institutions, 2013, June (1), Lead Article