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"Trading Fees and Slow-Moving Capital", with Adrian Buss (INSEAD), May 2015.

In some situations, investment capital seems to move slowly towards profitable trades. We develop a model of a financial market in which capital moves slowly simply because there is a proportional cost to moving capital. we incorporate trading fees in an infinite-horizon dynamic general-equilibrium. We develop a general-equilibrium model with heterogeneous investors who have an every-day motive to trade and pay transactions fees. Our model delivers the optimal, market-clearing moves of each investor and the resulting posted and transactions prices. We exhibit the e¤ect of transactions fees on deviations from the consumption CAPM.We compare expected returns on stocks carrying di¤erent fees and evaluate the ability of various empirical liquidity measures to act as pricing proxies.

"Pure Geographic Stock Returns Indexes" with Tymur Gabunia (INSEAD) and Richard Marston(Wharton School University of Pennsylvania), November 2014

In most statistical studies of international stock returns, a firm is classified as belonging to a country (i.e., included in the country index) if it is listed in the stock market of that country. This classification scheme ignores the operations of the firm. The distinction between place of stock trading and place of business is becoming more and more relevant as a growing number of firms have activities abroad. We propose, instead, to allocate firms to "geographic zones" according to the place where they conduct business and we re-measure zone returns in keeping with that classification scheme.


December 2008
Mathematica code for the Basak-Cuoco example in the paper, by Dumas and Lyasoff.

November 2009
Matlab code for the Basak-Cuoco example, written by Adrian Buss (Goethe Universität Frankfurt).

Policy Speech

"Ex ante vs. ex post", Pre-G8 summit conference in Paris on May 24, 2011


Old Working Paper

Here is a note which I wish I had published at the time of its writing (because it seems to have been the first derivation of what has come to be known as "forward" or "model-free" volatility):
Dumas, Bernard, 1995, "The meaning of the implicit volatility function in case of stochastic volatility."
This note was originally intended as an appendix to the Dumas, Fleming and Whaley (Journal of Finance, 1998) paper. It is the note referred to on Page 860 of Britten-Jones and Neuberger (Journal of Finance, 2000, pp. 839-866) and referred to as Dumas (1995) in Driessen, Maenhout and Vilkov (Journal of Finance, 2009).



"The Intended and Unintended Consequences of Financial-Market Regulations: A General Equilibrium Analysis" with A.Buss (INSEAD), R.Uppal (EDHEC) and G.Vilkov (Frankfurt School of Finance and Management), Journal of Monetary Economics, 81, 25-43

"Hysteresis bands on returns, holding period and transaction costs" with F.Delgado (Universidad del Pacifico) and G.W. Puopolo (Bocconi University, IGIER & CSEF), Journal of Banking and Finance 57, (2015) 86-100

"Incomplete-Market Equilibria Solved Recursively on an Event Tree", with Andrew Lyasoff , Journal of Finance 67, N°5 (2012) .

"Equilibrium Portfolio Strategies in the Presence of Sentiment Risk and Excess Volatility," with A. Kurshev and R. Uppal, April 2009, Journal of Finance, Vol.64, N°2, pp  579-629

F&C, Case study, June 2007

Watson Wyatt, Case study, February 2007

What Can Rational Investors Do about Excessive Volatility and Sentiment Fluctuations?, Working paper, November 2005

Why Not Trade Pension Claims?, with Juerg Syz, Financial Analysts Journal, Vol.63, No. 1 (Jan -Feb, 2007), pp.46-54

Rothschild Bank AG, Case study, July 2005

Aronson+Johnson+Ortiz, Case study, May 2005

Cross-Border Valuation, in The INSEAD-Wharton Alliance on Globalizing: Strategies for Building Successful Global Businesses, January 2004

Are Correlations in International Stock Returns Justified by Subsequent Changes in National Outputs?, Journal of International Money and Finance Vol. 22, N°6, pp 77-811, January 2003

A central-planning approach to Dynamic incomplete-Market Equilibrium, December 2002 (Working paper, with Pascal Maenhout)

"Are Correlations in International Stock Returns Justified by Subsequent Changes in National Outputs?" with C. R. Harvey and P. Ruiz, The Journal of International Money and Finance, 22 (2003), 777-811.

"The Forward Calculation of Compound Option Prices," with A. Buraschi, The Journal of Derivatives, Fall 2001.

"Pass-through and Exposure," with G. Bodnar and R. C. Marston, The Journal of Finance, 57 (2002), 199-232.

"Global Diversification, Growth and Welfare with Imperfect Markets for Goods," with R. Uppal, The Review of Financial Studies, 14 (Spring 2001), 1, 277-305.

"Efficient Inter-temporal Allocations with Recursive Utility," with R. Uppal and T. Wang, Journal of Economic Theory, 93 (2000), 240-259.

"Implied Volatility Smiles: an Empirical Investigation," J. Fleming and R. E. Whaley, co-authors, The Journal of Finance, December 1998.

Financial Securities: Market Equilibrium and Pricing Methods, with B. ALLAZ, South Western publishing company, 1996.

Les titres financiers: équilibre du marché et méthodes d'évaluation, with B. ALLAZ, Presses Universitaires de France, 1995.

"Realignment Risk and Currency Option Pricing within a Target Zone," L. P. JENNERGREN and B. NASLUND, co-authors, European Economic Review, 39 (1995), 1523-1544.

"The World Price of Foreign Exchange Risk," B. SOLNIK, co-author, Journal of Finance, 50 (1995), 445-479.

"Siegels's Paradox and the Pricing of Currency Options," L. P. JENNERGREN and B. NASLUND, co-authors, Journal of International Money and Finance, 14 (1995), 213-223.

"A Test of the International CAPM Using Business Cycles Indicators as Instrumental Variables," in J. A. FRANKEL, ed., The Internationalization of Securities Markets, University of Chicago Press, 1994.

"Some Models of the International Capital Market," proceedings of the EEA, European Economic Review, 38 (1994), 923-931.

"How Long do Unilateral Target Zones Last?," with L.E.O. SVENSSON, Journal of International Economics, 36 (1994), 467-481.

"Currency Option Pricing within a Credible Target Zone," L. P. JENNERGREN and B. NASLUND, co-authors, Review of Futures Markets, 12 (1993), 323-346.

"Partial vs General Equilibrium Models of the International Capital Market," in R. VAN DER PLOEG, ed., Handbook of International Macroeconomics, 1994, Cambridge, U.K.: Basil Blackwell publishers.

"Monetary Contracting and the Design of Sustainable Exchange Rate Zones," with F. DELGADO, Journal of International Economics, 34 (1993), 201-224.

"Capital Market Equilibrium and the Real Exchange Rate in a Spatially Separated World," Review of Financial Studies, 5 (1992), 2, 153-180.

"Target Zones Broad and Narrow," in P. KRUGMAN and M. MILLER eds, Exchange Rate Targets and Currency Bands, Cambridge University Press, 1992.

"An Exact Solution to a Portfolio Choice Problem under Transactions Costs," with E. LUCIANO, Journal of Finance, 46, June 1991, 577-595.

"Super Contact and Related Optimality Conditions," Journal of Economic Dynamics and Control, 15 (1991), 675-685.

"The Money and Bond Markets in France: Segmentation vs Integration," Journal of Banking and Finance, 14 (1990), 2/3 613-636, with B. JACQUILLAT.

"Performance of Currency Portfolios Chosen by a Bayesian Technique: 1967-1985," Journal of Banking and Finance, 14 (1990), 2/3, 539-558, with B. JACQUILLAT.

"Two-Person Dynamic Equilibrium in the Capital Market," Review of Financial Studies, 2 (1989), 2, 157-188.

"Exposure to Currency Risk: Definition and Measurement," Financial Management, Summer 1984, M. ADLER, co-author.

"La demande de dollars des agents économiques ne résidant pas aux U.S.A.," Archives de 1'I.S.M.E.A., 1983, P. PONCET, co-author.

"International Portfolio Choice and Corporate Finance: A Synthesis," Journal of Finance, June 1983, M. ADLER co-author.

"Accounting Standards and Exposure Measurement" in R. ENSOR and B. ANTL, eds., The Management of Foreign Exchange Risk, Euromoney Publications, 1982, M. ADLER co-author.

"A Quadratic Rational Expectations Theory of Capital Markets," Finance, 1982, no. 4

"Sharing Rules and Equilibrium in a Monetary Economy," in M. SARNAT and G. SZEGO, eds., Saving, Investment and Capital Markets in an Inflationary Economy, Ballinger 1982.q

"Should Exposure Management Depend on Translation Accounting Methods?" Euromoney, June 1981, M. ADLER co-author.

"Foreign Exchange Risk Management," in B. ANTL, ed., Currency Risk and the Corporation, Euromoney Publications, 1980, M. ADLER co-author.

"The Theorems of International Trade Under Generalized Uncertainty," Journal of International Economics, 10 (1980), pp. 481-498.

"The Exposure of Long-Term Foreign Currency Bonds," Journal of Financial and Quantitative Analysis, Vol. XV, no. 4, November 1980, M. ADLER co-author.

"Controlling E.E.C. External Trade by Open Market Intervention," with M. L. DEBATISSE and B. YON, The Banker, Vol. 130, no. 649, March 1980.

"La politique agricole commune et les marchés mondiaux: proposition de marchés à terme de prélèvement et restitution," with B. YON and M. L. DEBATISSE, Banque, no. 392, pp. 147, 152, February 1980.

"Minimiser les risques de change," Revue Francaise de Gestion, no. 23, November/December 1979.

Le coût du capital, valeur de la firme et interdépendence des décisions d'investissement et de financement," Analyse Financiere, ler trimestre 1979, P. PONCET, co-author.

"Financial Decision Making for the Firm in an Open Economy," Handbook of Financial Economics, J. BICKSLER, ed., North-Holland, 1978, M. ADLER, co-author.

Book review of: R. J. Herring & R. C. Marston, National Monetary Policy and International Financial Markets, in Vie et Science Economique, July 1978.

"The Theory of the Trading Firm Revisited," Journal of Finance, June 1978.

"The Micro-economics of the Firm in an Open Economy," American Economic Review, February 1977, M. ADLER, co-author.

"Default Risk and the Demand for forward Exchange," Financial Decision Making Under Uncertainty, H. LEVY and M. SARNAT, eds., Academic Press, 1977, M. ADLER, co-author.

"Anticipations rationnelles et efficience du marché," Institutions et Marchés Financiers, Séminaire E.S.S.E.C. - F.N.E.G.E., 3/4/5 June 1976.

"Portfolio Choice and the Demand for Forward Exchange", American Economic Review, May 1976, M. ADLER, co-author.

"Optimal International Acquisitions," Journal of Finance, March 1975, M. ADLER, co-author.

The Long Term Financial Decisions of the Multinational Corporation", International Capital Market, E. ELTON and M. GRUBER, eds., North-Holland, 1975, M. ADLER, co-author.