Volatility risk premia compensate agents for holding assets whose payoffs correlate with times of high return variation. This paper takes a structural approach to explain the cross-section of volatility risk premia of stocks using a Lucas orchard with heterogeneous beliefs, stochastic...

Several authors have proposed series expansion methods to price options when the risk-neutral density is asymmetric and leptokurtic. Among these, Corrado and Su (1996) provide an intuitive pricing formula based on a Gram-Charlier Type A series expansion. However, their formula contains a...

We develop generalised indirect inference procedures that handle equality and inequality constraints on the auxiliary model parameters. We also show that the asymptotic efficiency of such estimators can never decrease by explicitly taking into account Lagrange multipliers associated with...

Ambivalence in the regulatory definition of capital adequacy for credit risk has recently stirred the financial services industry to collateral loan obligations (CLOs) as an important balance sheet management tool. CLOs represent a specialised form of Asset-Backed Securitisation (ABS), with...

We provide a test of the Monday effect in daily stock index returns. Unlike previous studies we define the Monday effect based on the stochastic dominance criterion. This is a stronger criterion than those based on comparing means used in previous work and has a well defined economic meaning. We...

This paper reviews fundamental concepts in environmental economics and explores theoretical results regarding the choice of the key policy instruments for the control of externalities: taxes, subsidies and marketable permits. The paper explains why today market mechanisms are increasingly being...

Equilibrium models have been proposed in literature with the aim of describing the evolution of the price of emission permits. This paper derives first a reducedform model from an equilibrium model and thereby explains how existing reducedform models are related to equilibrium models. Second, by...

Allowing for a richer information structure than usual, we show that rational traders’ calculation with short-term price fluctuations may heavily influence their behaviour even if the interim price is not influenced by non-rational agents i.e. there is no noise trader risk. Instead, traders...