in the information set. This "residual risk" can be fully diversified at a zero risk premium. We show that potential … welfare gains from risksharing depend on a weighted average of the variance of residual risk at different horizons. Three …

risk. I show that idiosyncratic risk does not change the volatility bounds at all when consumers have CRRA preferences and …This paper uses Hansen and Jagannathan's (1991) volatility bounds to evaluate models with idiosyncratic consumption … that idiosyncratic risk can help to enter the bounds when idiosyncratic uncertainty depends on the aggregate state of the …

Beginning in 1998, U.S. commercial banks may determine their regulatory capital requirements for financial market risk … exposure using value-at-risk (VaR) models i.e., models of the time-varying distributions of portfolio returns. Currently …

this shift. At the aggregate level, declining volatility of net operating revenue reflects reduced volatility of net … associated with higher risk and lower risk-adjusted profits. These results suggest little obvious diversification benefit from …

dividend process of a risky asset. Under perfect information, the presence of risk-neutral arbitrageurs unambiguously reduces … the volatility of asset returns. When arbitrageurs are uncertain about the drift of the dividend process, they condition … arbitrageurs can lead to an increase in the equilibrium volatility of asset returns. The arbitrageurs' inference problem gives rise …

We define CoVaR as the value at risk (VaR) of financial institutions conditional on other institutions being in … distress. The increase of CoVaR relative to VaR measures spillover risk among institutions. We estimate CoVaR using quantile … regressions and document significant CoVaR increases among financial institutions. We identify six risk factors that allow …

We decompose the time series of equity market risk into short- and long-run volatility components. Both components have … captures market skewness risk, while the long-run component captures business cycle risk. Furthermore, short-run volatility is … negative and highly significant prices of risk in the cross section of equity returns. A three-factor model with the market …

This paper examines how risk in trading activity can affect the volatility of asset prices. We look for this … normal levels. We investigate how the risks in convergence trading can affect price volatility in a form of positive feedback … swap spread tends to converge to a long-run level, although trading risk can sometimes cause the spread to diverge from …

The moral hazard problem associated with deposit insurance generates the potential for excessive risk taking on the … force mitigating that risk taking. We argue that in the presence of owner/manager agency problems, managerial risk aversion … may also offset the excessive risk taking that stems from moral hazard. Empirical models of bank risk tend to focus either …