Swiss Finance Institute

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Ambiguity's Role in Global Currency Hedging and Portfolio Stability

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The paper written by Dr. Urban Ulrych and co-author Nikola Vasiljević has been published in the Journal of Banking & Finance. It explores optimal currency allocation for international investors who are both risk- and ambiguity-averse, using a robust mean–variance model that incorporates smooth ambiguity preferences. The findings show that accounting for ambiguity increases hedging demand, reduces estimation bias, and improves portfolio stability, as demonstrated through empirical analysis and out-of-sample backtesting.

The Swiss Finance Institute @ EPFL has been created to foster research in finance and to develop a strong offering of programs in finance and financial engineering at the Ecole Polytechnique Fédérale de Lausanne. The focus is on the areas within finance that have a natural interaction with mathematics, statistics, engineering, and science, namely, mathematical finance, financial econometrics, and entrepreneurial finance.

SFI teaching programs

The Swiss Finance Institute @ EPFL participates in serveral teaching programs:

Fields of Competences

  • Asset pricing
  • Corporate finance and governance
  • Financial engineering
  • Financial technology
  • International finance
  • Risk management
  • Sustainable finance

Support

The Swiss Finance Institute @ EPFL benefits from the institutional support of the Swiss Finance Institute, a private foundation created in 2006 by Switzerland’s banking and finance community in cooperation with leading Swiss universities, and from Swissquote, who endowed the Swissquote Chair in Quantitative Finance.

UPCOMING EVENTS

RECENT PUBLICATIONS

The effect of macroprudential policies on homeownership: Evidence from Switzerland

E. Bolliger; A. Bruhin; A. Fuster; M. Ganarin 

Journal of Urban Economics. 2025. Vol. 146. DOI : 10.1016/j.jue.2025.103749.

Global currency hedging with ambiguity

U. Ulrych; N. Vasiljević 

Journal of Banking and Finance. 2025. Vol. 172, p. 107366. DOI : 10.1016/j.jbankfin.2024.107366.

Adaptive Joint Distribution Learning

D. Filipovic; M. D. Multerer; P. Schneider 

SIAM JOURNAL ON MATHEMATICS OF DATA SCIENCE. 2025. Vol. 7, num. 1, p. 28 – 54. DOI : 10.1137/24M1629900.

Stripping the Swiss discount curve using kernel ridge regression

N. Camenzind; D. Filipovic 

European Actuarial Journal. 2024. DOI : 10.1007/s13385-024-00386-4.

StockTwits classified sentiment and stock returns

M. A. Divernois; D. Filipović 

Digital Finance. 2024. Vol. 6, num. 2, p. 249 – 281. DOI : 10.1007/s42521-023-00102-z.