PONCET Patrice

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This doctoral thesis studies the dynamics of financial markets when extreme events and political variables are taken into account. It is recognized that financial crises as well as national and international political events have a significant impact on global stock markets, and this impact has become even more important with the increased integration of financial markets, such that a shock in one country can quickly have repercussions on other markets.

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We analyze a defaultable firm’s optimal capital and debt structures when its debt includes senior straight and Write-Down (WD) bonds. Credit events and premature or terminal bankruptcy are triggered if the firm’s asset value hits specific barriers. The optimal capital structure and the optimal straight/WD debt mix are jointly determined along with the optimal level of debt reduction. The firm increases its leverage by swapping both equity and straight debt for WD bonds. The credit spread on the straight debt is shown to be considerably lower when the firm’s capital structure also includes WD bonds, for a given global leverage.

We analyze the effects of asset return predictability at various horizons on an individual's portfolio strategy and welfare gains as measured by a certainty equivalent return rate, for long term investors. We use a method to account for long horizon predictability that does not make violence to the data, and two alternative OLS procedures that allow investors to capture the differential information contained in various period returns. More specifically, our second procedure exploits the information present in the term structure of "forward" equity risk premia. We show that, adopting this procedure, the investor's welfare gain may be substantial relative to that obtained from using short horizon predictability only. Consequently, investors are better off by simultaneously using information in short and long horizon returns.

The gradual disappearance of inflation fears during the era of the macroeconomic "Great Moderation" is now a thing of the past: the US financial crisis of the "Subprimes", the "Great Recession" as well as the subsequent sovereign debt crisis have led to a new economic order characterized by increased inflation volatility, increased commodity price shocks and mistrust of the creditworthiness of some sovereign issuers, to mention only three characteristics. From the reduction of inflation-indexed sovereign debt issuance to negative real rates and very long maturities, this new situation tends to jeopardize both conventional inflation-hedging strategies and purely nominal directional strategies. This thesis aims to investigate the effects of these events that have changed the macro-financial landscape and to evaluate their consequences in terms of inflation hedging, both in the asset-liability management of institutional investors and in the savings of individuals. Three alternative hedging strategies are proposed to deal with them.

Within an agency theoretic framework adapted to the portfolio delegation issue, we show how to construct optimal benchmarks. In accordance with US regulations, the benchmark-adjusted compensation scheme is taken to be symmetric. The investor’s control consists in forcing the manager to adopt the appropriate benchmark so that his first-best optimum is attained. Solving simultaneously the manager’s and the investor’s dynamic optimization programs in a fairly general framework, we characterize the optimal benchmark. We then provide completely explicit solutions when the investor’s and the manager’s utility functions exhibit different CRRA parameters. We find that, even under optimal benchmarking, it is never optimal for the manager, and therefore for the investor, to follow exactly the benchmark, except in a very restrictive case. We finally assess by simulation the practical importance, in particular in terms of the investor’s welfare, of selecting a sub-optimal benchmark.

We analyze a defaultable firm's optimal capital and debt structures when its debt includes senior straight bonds and either Contingent Convertible or Write-Down bonds. The firm's stakeholders bear a liquidity risk prior to the debt maturity and a solvency risk at maturity. Credit events and premature or terminal bankruptcy are triggered if the firm's asset value hits barriers that are endogenously obtained. The optimal capital structure and the optimal senior/loss-absorbing debt mix are jointly determined, in closed form, along with the optimal level of debt reduction in the case of Write-Down debt. The credit spread on the senior debt is shown to be considerably lower when the firm's capital structure also includes loss-absorbing bonds, for a given global leverage. The spreads on the loss-absorbing and senior debts predicted by the model are realistic for plausible values of the exogenous parameters.

We study a defaultable firm's debt priority structure in a simple structural model where the firm issues senior and junior bonds and is subject to both liquidity and solvency risks. Assuming that the absolute priority rule prevails and that liquidation is immediate upon default, we determine the firm's interior optimal priority structure along with its optimal capital structure. We also obtain closed-form solutions for the market values of the firm's debt and equity. We find that the magnitude of the spread differential between junior and senior bond yields is positively, but not linearly related to the total debt level and the riskiness of assets. Finally, we provide an in-depth analysis of probabilities of default and the term structure of credit spreads.

This thesis contributes to academic research in real estate by providing a risk assessment for commercial real estate investment management. Real estate investment has many specificities such as location, liquidity, investment size or obsolescence and requires active management. These specificities make traditional risk measurement approaches difficult to apply. This research work is presented in the form of four academic papers dealing with portfolio management and risk in real estate. This work is built on the existing academic literature and is based on previous publications. First, it analyzes tenant exit options contained in commercial leases in continental Europe and studies their impacts on portfolio value, management and risk. In the first paper, we consider tenant exit options included in commercial leases in continental Europe to better assess the value and risk of a real estate portfolio. This is achieved through the simultaneous use of Monte-Carlo simulations and option theory. The second article deals with the optimal holding period of a real estate portfolio when options contained in the leases are taken into account. The third article focuses on Value at Risk and proposes a model that takes into account the non-normality of real estate returns. This is obtained by combining the use of the Cornish-Fisher development and rearrangement procedures. Finally, in a last article, we present a model specially developed for the calculation of Value at Risk in real estate. This model has the particularity of taking into account the specificities of real estate and the parameters that have a greater influence on the value of assets.

This thesis has three independent parts. The first part deals with closed forms of the Wiener-Hopf factorization for Lévy processes. We survey the half-dozen cases for which the factorization can be written explicitly, and focus on meromorphic functions with poles of order two. The second part focuses on the inversion of the Laplace transform. Its goal is to present a new approximate method, in a probabilistic context. If the Laplace transform has an easily identifiable behavior in zero and if the associated density is bounded, then this method allows to obtain a uniform bound for the error on the distribution function. The efficiency of this method is tested on two non-trivial examples. Finally, the third and last part is dedicated to the pricing of exotic options in the log-stable finite moment model of Carr and Wu. In some cases, it is possible to obtain closed formulas in the form of convergent series for the prices of lookback and barrier options. For all other cases, we study various simulation techniques for the trajectories of the underlying process, with the aim of an evaluation by Monte-Carlo method.

Research and innovation are two essential components of any economy and their financing is a major concern for governments and entrepreneurs. The capital needed to develop these activities is generally important and the financing mode by venture capital companies seems to be the adequate solution, mainly for small companies that do not have a sufficiently solid financial base. This thesis is part of this context and aims to explore different aspects of this financing method. First, it examines the exit phase of the venture capitalist of the affiliated company and establishes a theoretical model that determines the optimal timing of the IPO in an environment where the generated flows are uncertain. This model takes into account the initial undervaluation, as well as the holding period. Then, it highlights a second theoretical model that aims to determine the optimal thresholds that trigger the investment decisions of the venture capitalist. Finally, this thesis studies the effect of the presence of a venture capitalist on the innovative activity within the companies, as well as the impact of innovation on the behavior of these investors towards these companies.

In this thesis we develop a model of the hedge fund industry in which the various fees charged (management and redemption fees) are endogenously determined in a competitive market. We empirically explore a first implication of the model which is that deteriorated skewness is caused by investment in illiquid assets. We then empirically explore two other implications of the model which are that the size of an AIF is decreasing with the volatility of liquidity withdrawals, and then that the return realized by an AIF is also decreasing with the volatility of withdrawals due to client liquidity needs. In the next chapter, we model hedge fund returns according to the Pareto Stable Law, which is better able to describe a skewed and leptokurtic distribution, and we then assess the impact of this modeling on risk and performance measures commonly used by hedge fund investors. In the fourth chapter, we propose an equilibrium model of an economy consisting of an investor and a fund manager where we use filtration coarsening techniques to account for the information differential and thus provide a new justification for the use of portfolio delegation. In the last chapter, we highlight the importance of modeling the evolution of an alternative fund according to a diffusion-jump process to correctly value a portfolio insurance contract managed according to the cushion method (CPPI). We show in a second step through the use of non-parametric statistical methods that the returns of hedge funds exhibit a level of jump activity similar to that present in equity indices, as well as the existence of a common factor between hedge funds and equity indices that corresponds to a systemic jump.

The valuation of high-dimensional expected exercise products requires discretization techniques for Monte Carlo methods. The objective of this thesis is to solve this type of problem in the context of market models and models with uncertain volatility. In the first case we seek to solve an optimal stopping time problem, in the second we seek to solve a stochastic optimal control problem. The associated backward equations involve conditional expectations that we seek to estimate numerically. The accuracy of the estimates of prices and hedge ratios is crucial for the management of structured product portfolios. Thus we also study in this thesis the variance reduction methods applied to Monte Carlo techniques.

This thesis, initiated in November 2005 in the PRISM laboratory, is part of the process of evaluating a new type of financial asset class: credit derivatives. At the end of the 1990s and as a consequence of the Basel regulation, financial institutions were looking for solutions to transfer credit risk off their balance sheet in order to refinance themselves at lower cost. At the same time, investors were looking for more and more complex financial products in order to improve returns. Thus, the asset class of credit structures has imposed itself on the market. These are derivatives that combine securitization techniques and optional features in order to meet the new needs of financial institutions as well as the requirements of investors. The author presents various complex credit derivative structures and analyzes the inherent risks. He then proposes closed-end valuation formulas in cases where these did not previously exist. It should be noted that in most cases, banks use simulation methods to determine prices (a time-consuming approach that is not well suited to the needs of trading rooms). Then, hedging approaches are proposed which aim at controlling the positions concerning financial products whose associated risks were unknown until a short time ago. The first part of the thesis is devoted to the presentation of the economic and market context. In addition, it provides a pedagogical summary of the various quantitative tools and scientific concepts essential to the understanding of credit derivatives. The author then devotes a section to Collateralized Oebt Obligations (COOs), options on COO tranches, COO Squared, Constant Proportion Collateralized Oebt Obligations (CPOOs), and Foreign Exchange Collateralized Obligations (CFXOs). Although initiated three years ago, this work is gaining importance in the current context of the subprime crisis.

This thesis deals - in three essays - with portfolio choice problems in a situation of partial information, a theme that we present in a short introduction. The essays developed each address a particularity of this problem. The first essay (co-written with M. Jeanblanc and V. Lacoste) deals with the question of choosing the optimal strategy for a terminal utility maximization problem when the evolution of prices is modeled by an Itô-Lévy process whose trend and intensity of jumps are not observed. The approach consists in rewriting the initial problem as a reduced problem in the filtration generated by the prices. This requires the derivation of the nonlinear filtering equations, which we develop for a Lévy process. The problem is then solved using dynamic programming by the Bellman and HJB equations. The second essay addresses in a Gaussian framework the question of the cost of uncertainty, which we define as the difference between the optimal strategies (or maximum wealth) of a perfectly informed agent and a partially informed agent. The properties of this cost of information are studied in the context of the three standard forms of utility functions and numerical examples are presented. Finally, the third essay addresses the issue of portfolio choice when market price information is only available at discrete and random dates. This amounts to assuming that price dynamics follow a marked process. In this framework, we develop the filtering equations and rewrite the initial problem in its reduced form in discrete price filtration. The optimal strategies are then computed using the Malliavin calculus for random measures and an extension of the Clark-Ocone-Haussman formula is presented for this purpose.

Option prices depend on several random factors. This thesis studies the valuation of options when the underlying asset pays a dividend at a stochastic rate. The dividend rate is assumed to be a time-homogeneous diffusion process. Within this framework, we develop different valuation approaches that are illustrated in several specified stochastic dividend models. We also perform an empirical study of the performance of these models.

In this thesis we investigate the continuous time limit of conditionally heteroscedastic GARCH models. In the first part we study the aggregation of GARCH models and the genesis of weak GARCHs as well as the temporal aggregation of stochastic volatility specifications (SR-SARV) bypassing several limitations of weak GARCHs. The second part examines contemporaneous or individual aggregation of GARCH models and proposes methods for estimating weak GARCH representations. In the third part, an analysis of the weak convergence and limit of a sequence of semi-martingales is proposed. Four relevant applications in finance involving semi-martingales and weak convergence illustrate the analysis: AOA, Asian option pricing, dynamic programming, local risk minimization strategies. The diffusion limit of weak GARCH is then comfortably addressed in the fourth part. This limit can take several forms depending on the convergence conditions considered. The asymptotic equivalence of the statistical experiments of GARCH, stochastic volatility and diffusion processes is also clarified.

This thesis studies different extensions of the Libor and Swap interest rate market models by analyzing their performance in valuing and/or hedging caps and swaptions. In addition, we specify the implementation and calibration of the different models obtained. Furthermore, we value some quanto products. To do so, we derive the dynamics of the foreign Libor forward rate under the domestic forward measure using the spot exchange rate. This approach leads to dynamics involving different covariance matrices. Finally, we develop, within the framework of the monetary economics proposed by Lioui and Poncet (2004), a short-term nominal rate model whose dynamics follow a mixed diffusion-jump process. We also discuss the impact of introducing jumps on some financial quantities such as the inflation risk premium and real and nominal interest rates.

The purpose of this thesis is to analyze the fundamental issues related to the introduction, development and operation of pension funds. First, the question of the feasibility of a Pareto-improving transition from a pay-as-you-go to a funded pension system is raised. The analysis carried out shows that taking uncertainty into account, in the framework of an endogenous growth model, can invalidate the result of the certain case, affirming the feasibility of such a reform. Once the transition has taken place, the question arises as to the effects of the reform, which may call for an adaptation of policies. The analysis focuses on one important effect: the increased role of stock price changes in consumer spending, reflecting an increase in the wealth effect of the stock market. The results of the study, based on the example of the US economy, suggest that this development leads to an increase in macroeconomic instability and calls for a more pronounced inclusion of stock price changes in the Fed's reaction function. The structure and functioning of pension funds are analyzed in a third step. The theory of options first defines the tool of analysis, and a global study of the different levels of application of this theory constitutes the objective of the analysis. This study allows the definition of the main option incorporated in pension funds. We conclude that the different possible formulations of the strike price strongly influence its characteristics. Finally, we define a unified framework for determining and comparing optimal asset allocations of the main types of pension funds. Similarities between the investment strategies adopted by the different funds are highlighted. The analysis also shows that the provision of guarantees by external organizations can lead to a more aggressive optimal investor strategy.

This thesis consists of three essays on the theory of incomplete financial markets in continuous time. In the first chapter, we study the valuation of measurable contingent assets with respect to an information structure richer than that generated by the price of the traded assets. We show that the absence of arbitrage opportunity (AOA) gives rise to a price interval for and characterize hedge prices using two auxiliary stochastic control problems. Since the bounds of the interval are associated with near-safe hedging, each price within it induces a risk of loss and, hence, the choice of a price can only be made with respect to a risk norm representing the agent's preferences. In the second chapter, we immerse the valuation problem in the optimal portfolio choice problem and study the notion of utility prices. In particular, we show that such prices exist, that they are compatible with the AOA and that they have many interesting properties. In the case of default-prone assets, and more generally in the case of credit derivatives, we solve the problem explicitly and present many numerical examples. The third chapter deals with the optimal portfolio choice in a delegated management model. The manager chooses not only the composition of the fund but also a consumption plan in order to maximize his utility. The investor also seeks to maximize his utility but only has access to the financial market through the fund and pays a commission for this. We formulate the problem of simultaneous utility maximization for both agents in the context of a stochastic game whose solution is obtained explicitly. The solution is closely related to the microeconomic treatment of monopoly situations. In particular, in equilibrium, the value functions do not depend on either the manager's utility function or the commission rate.

The purpose of this thesis is to propose a model of bonds and bond options in the presence of default risk in the most realistic framework possible. The first chapter presents the main models that account for the valuation of debt issued by private firms, subject to default risk. We find that it is difficult, within a realistic framework, to obtain a simple and easy-to-implement analytical formula to calculate the value of securities subject to default risk. The second chapter proposes an extension of the Merton (1974) model. We present a bond valuation model of risky zero-coupon bonds based on both the Cox, Ingersoll, and Ross (1985) single-factor rate model and the explicit finite difference method improved by Hull and White (1990). The third chapter focuses on the valuation of coupon bonds in the presence of default risk. The default event is modeled as the first date when the value of the firm's assets falls below the value of its liabilities. In line with practice, default is declared not only for the coupon bond, but also for all other debts of the firm. In case of default, the bondholder receives a fraction of the value that the bond would have had in case of non-default. We show that the level of spreads deduced by our model corresponds to that observed in practice. Through an empirical study on the French bond market, we show that our model estimates the price of private sector coupon bonds in a satisfactory manner. In the fourth chapter, we adapt the model constructed in the previous chapter to the valuation of European and American bond options in the presence of default risk. We distinguish three categories of options: (I) options issued by third parties with no default risk on risky bonds, (II) options issued by third parties subject to default risk on bonds with no default risk, and (III) options in the presence of two sources of default risk, the first relating to the option writer and the second to the underlying.

This thesis studies the valuation of European and path-dependent currency options in a stochastic volatility framework. The use of random volatility is justified by econometric studies in the first chapter. The second chapter puts into perspective different European option pricing models with stochastic volatility and shows, with the help of an empirical study on the dollar-mark options market, that the Heston (1993) model is the most suitable to reproduce the observed volatility surface. A calibration procedure is used to estimate the values of the parameters of the volatility diffusion process. The second part of this thesis is devoted to exotic options and their valuation by taking into account the information content of the volatility surface. The third chapter focuses on different methods of extracting implied density functions from option prices. The fourth chapter studies different models of implied trees. They aim at valuing exotic options from a tree deformed in order to value a continuum of European options at their market price. The study of these models and the implementation of Derman and Kani's (1994) model show that these techniques sometimes present arbitrage opportunities and assume that volatility is a deterministic function of the underlying price and time, which is not empirically verified. To overcome these problems the fifth chapter uses the stochastic volatility framework and a finite difference technique to evaluate American and exotic options. Differences in premiums from the Black-Scholes model are explained. The convergence of the prices of the stochastic volatility model with those of a static replication is demonstrated under certain assumptions. These results suggest a hedging strategy for barrier options.

We develop three applications of option theory to problems specific to the writing and valuation of debt contracts. First, we systematically establish the correspondence between the type of debt contract chosen by the firm and the optional form of the resulting stock. This optional form is an issue in negotiations between creditors and shareholders in order to limit the incentive of the latter to increase the firm's risk. We study different clauses, as well as some ways for shareholders to circumvent the debt contract, that make the stock a complex option. Second, we evaluate the securities issued by firms when bankruptcy proceedings are considered. The focus is on U.S. legislation, but the model is also applied to the French situation in a case study. The impacts of the bankruptcy procedure on the firm's financial decisions are that (I) the optimal leverage decreases when the firm is entitled to an observation period, (II) if the assignees consider reorganizing the firm, the shareholders have an incentive to declare an early default, (III) for a firm with optimal leverage, the default risk premia are independent of the bankruptcy procedure. Third, we examine the renegotiation of the sovereign debt contract which consists in reducing the nominal value of the debt or extending its maturity. We show that there is a renegotiation space where both parties share a surplus. Our model explains some stylized facts about sovereign debt, namely that (I) risky or highly indebted countries get financing, (II) debt reduction can be beneficial to both parties, as well as (III) the deal combining debt reduction and rescheduling of a small part of the nominal.

Corporate finance differs from market finance both in the techniques used and in the heterogeneity of its analytical schemes. However, the use of option theory is particularly fruitful for analyzing the main problems of corporate finance. On the one hand, corporate investment decisions are likely to be analyzed in terms of contingent securities when the underlying projects have a flexibility component. This gives them an option value, the taking into account of which is likely to invalidate the traditional rules of investment decisions of the net present value type. This approach to corporate operating decisions is commonly referred to in the literature as real options theory. Second, the securities issued by the firm to finance itself can also be interpreted in terms of derivatives. Options theory then allows us to develop a unified scheme for valuing these securities, with the major application of this analysis residing in the study of the default risk of private sector bonds. Finally, we can synthesize these two approaches by studying the interactions between the investment and financing policies of a firm whose assets have a flexibility component that can be analyzed in terms of real options. These interactions, which fall within the framework of agency theory, can concern both the influence of debt and the structure of the firm's shareholding on its investment decisions. This thesis thus proposes a unified approach to corporate finance through option theory. By its quantitative aspect as well as by its anchoring in the theory of arbitrage valuation, it also constitutes an attempt at methodological reconciliation between corporate and market finance.

This thesis presents optimal techniques for the valuation and evaluation of hedging parameters of complex structured products using exotic options. In this respect, when no exploitable analytical formula can be obtained, we resort to Monte Carlo techniques whose main qu'alites are their flexibility, the diversity of their domains of use and their often fruitful application to the solution of multi-dimensional problems. The main results presented in this thesis are the analytical valuation in the usual Brownian framework of path-dependent options whose payoff depends on extreme values of the price of the underlying asset recorded in a discrete and non-continuous manner during the life of the option, the efficient simulation by Monte Carlo of continuous extrema in order to value options with many extrema in their payoff. The use of probabilistic conditioning methods within the simulations to reduce the size of the problems and thus substantially decrease the computational time, and the application of optimal variance reduction techniques to the simulation of multi-support option prices and associated sensitivities. We also propose analytical approximations of prices and hedging parameters of products whose payoff uses functions of a large number of iid or inid variables by using certain methods and asymptotic theorems (Edgeworth developments, distribution of extreme values of iid laws,. ). Finally, techniques for valuing exotic options whose underlying price follows a discontinuous path are presented. Thus, we show how to efficiently value path-dependent options with jumps by Monte Carlo and indicate methods for valuing multi-support options whose joint dynamics of the rates of return is of the multivariate jump-diffusion type.

The author examines financial pricing models, new financial techniques and credit management, new financial techniques in retail banking, risk management in financial markets, and the valuation and management of interest rate products.

This thesis studies the valuation of two derivative products: Asian options and quanto contracts. Asian options are path-dependent contingent assets whose final values vary according to the average calculated over a predetermined interval. Under standard assumptions, an exact analytical formula does not exist for their prices. Approximate analytical formulas are proposed in the first two chapters. These formulas are simple to use and have a satisfactory accuracy compared to Monte Carlo simulations. The third chapter extends the idea of mean option to interest rates. Formulas for evaluating options on the mean of interest rates are proposed and some numerical examples are given to show their use. The fourth and fifth chapters deal with the valuation and hedging of quanto contracts. A new model is developed using the equivalent martingale measurement technique. It includes risky assets denominated in two currencies and assumes correlated processes between the asset prices. The main conclusion is that a domestic investor does not need to distinguish between domestic and foreign assets under the martingale equivalent probability measure. The instantaneous return on a foreign asset is equal to the instantaneous foreign interest rate plus a sum of correlations that can be positive or negative. Explicit formulas are derived and examples are given to demonstrate the main results. The important role of correlation in a quanto contract is highlighted by numerical examples in the final chapter.

The objective of this thesis is to propose a new approach to portfolio management delegation within the framework of the modern theory (the martingale approach) of financial asset pricing and portfolio selection. A typology of delegation is proposed, namely a distinction between active and passive delegation according to the investor's objectives. One of the contributions of the thesis, as far as the problematic is concerned, is the systematic use of a portfolio, the benchmark portfolio, controlled by the investor and specified ex ante to the manager. Without the active approach of delegation, it is the control variable of the investor that allows him to calibrate the management of the manager and thus to control it. In the passive approach, it constitutes the standard against which the manager will be judged.

This research proposes to define the theoretical framework for determining the term structure of interest rates and the value of interest rate contingent assets, taking into account, in particular, the randomness of rate volatility. This study examines both the arbitrage and general equilibrium approaches. We present option pricing models based on the price dynamics of the underlying asset, the bond, following the example of the Black-Scholes model. The limitations of these models lead us to highlight the fact that the functional relationship between the bond price and the interest rate is the major relationship in the arbitrage approach. Models based on the term structure of rates are well suited for valuing bonds and bond options. The Martingale approach provides the conceptual and mathematical framework for removing risk premiums from the formulas for valuing interest rate contingent assets and incorporating the original term structure of rates. Finally, we abandon the assumption of a constant or deterministic volatility of rates, to highlight its stochastic character. Two directions are favored. On the one hand, the evaluation of bonds is carried out in the framework of an economy with imperfect information, by considering that volatility is an unobservable variable and by using the mathematical tool of filtering. On the other hand, we evaluate the bonds in the framework of a model.

The demand for money and the stability of this demand, particularly in the short term, occupy a central place in monetary theory and in the conduct of economic policy. The partial questioning of the stability of the short-term money demand function in recent years and in some countries has given rise to a major research effort. The main purpose of our study is to measure empirically the behaviour of the short-term money demand function over the last twenty years in the main industrialized countries: the United States, France, Japan, the Federal Republic of Germany and the United Kingdom. Our analysis is based on a review of the literature concerning the theories of money demand, in particular its specification and stability, and on the implementation of tests such as Chow's test as well as new economic techniques: switching regimes test, cusum and cusum of squares tests, and arch model. The results of the tests show that money demand functions behave relatively homogeneously, although there are institutional nuances between countries. With the exception of the United States, for which the tests conclude that there is some instability, it is not possible to reject the hypothesis that the money demand function is stable in the short term over both short and long periods. Since the short-term stability of the money demand function makes it possible to predict the effect of a variation in the money supply on the economy, it seems desirable to have a monetary policy that sets the money supply as an intermediate target to ensure the stability of the economy.

The thesis is a set of six articles, all centered around the term structure of interest rates and interest rate risk management. The first article proposes a framework for managing a portfolio of interest rate derivatives. After identifying the appropriate risk factors, the sensitivity matrix of the portfolio is constructed and single factor speculation strategies are highlighted. The second and third papers study the notional bond future contract, both in terms of comparing the volatilities of prices and futures during the opening and closing periods of the markets and also to study the effectiveness of this future contract in hedging and optimal asset allocation problems. The fourth paper reviews the latest techniques for global balance sheet risk management while the fifth paper uses arbitrage arguments to evaluate the interest rate risk and margin risk of floating rate instruments. The last paper introduces a risk-neutral probability to obtain a simple expression for the value of a call or forward price of any financial asset.