arXiv subjects

Rosella Giacometti

Publications and source records attributed to Rosella Giacometti.

5 recordsLinked to original sources

arXiv2026

Market-Implied Sustainability: Insights from Funds' Portfolio Holdings

In this work we propose a framework to construct Market-Implied Sustainability (MIS) scores for individual firms by exploiting fund-level sustainability classifications and granular portfolio holdings. The central idea is that the relative over/under-representation of a stock in sustainability-oriented funds reveals a market-based assessment of its sustainability profile. We implement the methodology in the European context using the Sustainable Finance Disclosure Regulation (SFDR), considering Article 9 (``dark green'') funds as the sustainability-oriented segment and comparing their portfolio compositions to those of other funds. We compute MIS scores for a large cross-section of European companies over the period 2010--2025. We then examine how MIS relates to traditional firm-level ESG ratings provided by LSEG and analyze the determinants of potential divergences between the two measures. Finally, we assess the economic relevance of MIS through portfolio-tilting strategies, ranging from rule-based reallocations to constrained optimal allocation frameworks. The results show that MIS scores capture dimensions of sustainability that differ systematically from conventional ESG ratings. In portfolio applications, tilting toward firms with high MIS scores improves risk-adjusted performance, whereas strategies based solely on ESG ratings do not deliver comparable gains. Overall, the findings suggest that market-implied sustainability measures provide complementary information to fundamentals-based ESG metrics and have practical relevance for asset allocation and regulatory monitoring.

q-fin.PM↗

arXiv2026

An Axiomatic Risk-Reward Framework for Sustainable Investing

Continued interest in sustainable investing calls for an axiomatic approach to measures of risk and reward that focus not only on financial returns, but also on measures of environmental and social sustainability, i.e. environmental, social, and governance (ESG) scores. We propose definitions for ESG-coherent risk measures and ESG reward-risk ratios based on functions of bivariate random variables that are applied to financial returns and real-time ESG scores, extending the traditional univariate measures to the ESG case. We provide examples and present an empirical analysis in which the ESG-coherent risk measures and ESG reward-risk ratios are used to rank stocks.

q-fin.MF↗

arXiv2026

Modeling portfolio loss distribution under infectious defaults and immunization

We introduce a model for the loss distribution of a credit portfolio considering a contagion mechanism for the default of names which is the result of two independent components: an infection attempt generated by defaulting entities and a failed defence from healthy ones. We then propose an efficient recursive algorithm for the loss distribution. Then we extend the framework with more flexible distributions that integrate a contagion component and a systematic factor to better fit real-world data. Finally, we propose an empirical application in which we price synthetic CDO tranches of the iTraxx index, finding a good fit for multiple tranches.

q-fin.PR↗

arXiv2023

A return-diversification approach to portfolio selection

In this paper, we propose a general bi-objective model for portfolio selection, aiming to maximize both a diversification measure and the portfolio expected return. Within this general framework, we focus on maximizing a diversification measure recently proposed by Choueifaty and Coignard for the case of volatility as a risk measure. We first show that the maximum diversification approach is actually equivalent to the Risk Parity approach using volatility under the assumption of equicorrelated assets. Then, we extend the maximum diversification approach formulated for general risk measures. Finally, we provide explicit formulations of our bi-objective model for different risk measures, such as volatility, Mean Absolute Deviation, Conditional Value-at-Risk, and Expectiles, and we present extensive out-of-sample performance results for the portfolios obtained with our model. The empirical analysis, based on five real-world data sets, shows that the return-diversification approach provides portfolios that tend to outperform the strategies based only on a diversification method or on the classical risk-return approach.

q-fin.PM↗

arXiv2023

Non-parametric cumulants approach for outlier detection of multivariate financial data

In this paper, we propose an outlier detection algorithm for multivariate data based on their projections on the directions that maximize the Cumulant Generating Function (CGF). We prove that CGF is a convex function, and we characterize the CGF maximization problem on the unit n-circle as a concave minimization problem. Then, we show that the CGF maximization approach can be interpreted as an extension of the standard principal component technique. Therefore, for validation and testing, we provide a thorough comparison of our methodology with two other projection-based approaches both on artificial and real-world financial data. Finally, we apply our method as an early detector for financial crises.

q-fin.CP↗