We identify local and global factors across international bond markets that arepoorly spanned by the traditional level, slope and curvature factors but havestrong forecasting power for future bond excess returns. Local and global fac-tors are jointly signicant predictors of bond returns, where...

Due to their underlying assumptions, the standard concepts of risk aversion and preference for the present are generally defined separately and represented by scalar measures, and this implies many shortcomings. More specifically, if measured by a scalar, the risk aversion remains unchanged,...

In this paper, we consider an incomplete market framework and explain how to use jointly observed prices of the underlying asset and of some derivatives written on this assetfor an efficient pricing of other derivatives. This question involves two types of moment restrictions, which can be...

Credit Default Swaps (CDS) are in the process of becoming, liquid and extremelyinformative instruments of default risk. Yet, default swap market has severalnovel aspects that have not received much attention. In this paper we studyan aspect of CDS´s that relates to the prediction of financial...

CEO compensation has increased substantially over the past 15 years, but so has forcedturnover. Motivated by this observation, we investigate whether part of the developmentof CEO pay can be explained by a premium which compensates CEOs for increased job risk.We ¯nd that for the CEOs of the...

In this study, we examine whether changes in the investment opportunityset stemming from interest rate and credit risks are priced in the US, theUK and the Swiss equity premia by estimating both two-factor and three-factor versions of Merton’s ICAPM. The systematic pricing of credit riskis...

This paper examines latent risk factors in models for migration risk. We employ thestandard statistical framework for ordered categorical variables and induce dependencebetween migrations by means of latent risk factors. By assuming a Markov process forthe dynamics of the latent factors, the...

Sustainable debt has become a key issue in rating of private as well as sovereign debtors. The problem of how to estimate sustainable debt has also been at the center of debate over theAsian 1997-1998 financial crisis. If the external value of the currency depends on the external debt of a...