Rethinking Valuation and Pricing Models

34

Quantitative Easing, Financial Risk and Portfolio Diversification

Modena Matteo, Lossani Marco and Borello Giuliana

Catholic University of Milan

Chapter Outline

34.1 Introduction

34.2 Financial Markets and Macro-Finance Indicators Before and After 2006

34.3 Risk Aversion, Risk Premia and the Discounting Process

34.4 Concluding Remarks

References

34.1 Introduction

After the financial crisis broke out in autumn 2008, the US monetary authority engaged in an unprecedented expansion of the money supply. The federal funds rate and the short-term yields quickly approached the zero lower bound. Despite this, the level of resource utilization has remained unsatisfactorily low. In December 2008, the Federal Reserve announced the intention of purchasing ...