We investigate if asset return volatility is predictable by macroeconomic and financial variables and shed light on the economic drivers of financial volatility. Our approach is distinct due to its comprehensiveness: First, we employ a data-rich forecast methodology to handle a large set of...

This paper extends the empirical literature on volatility risk premium (VRP) and future returns by analyzing the predictive ability of commodity currency VRP and commodity VRP. The empirical evidence throughout this paper provides support for a positive relationship of commodity currencies VRP...

The 30-year U.S. swap spreads have been negative since September 2008. We offer a novel explanation for this persistent anomaly. Through an illustrative model, we show that underfunded pension plans optimally use swaps for duration hedging. Combined with dealer banks' balance sheet constraints,...

We develop a general equilibrium model with intermediaries at the heart of international financial markets. In our model, intermediaries bargain with their customers and extract rents for providing access to foreign claims. The behavior of intermediaries, by tilting state prices, generates an...

The paper analyses the information content of trades in Bund futures and German government bonds before and during the 1998 financial market turbulences and tests whether the contributions to price discovery of the two market segments were constant over time. The results suggest that, under the...

Why are spreads on corporate bonds so wide relative to expected losses from default? The spread on Baa-rated bonds, for example, has been about four times the expected loss. We suggest that the most commonly cited explanations - taxes, liquidity and systematic diffusive risk - are inadequate. We...

We estimate arbitrage-free term structure models of US Treasury yields and spreads on BBB and Brated corporate bonds in a doubly-stochastic intensity-based framework. A novel feature of our analysis is the inclusion of macroeconomic variables - indicators of real activity, inflation and...

This paper investigates the relative role of price discovery between two long-term swap contracts that exchange U.S. dollars for Japanese yen - the cross-currency basis swap and the foreign exchange (FX) swap - using structural state space models. Our main findings are that: (i) the currency...

In this paper we investigate whether cross-sectional information from local equity marketscontained information on devaluation expectations during the Asian crisis. We concentrate onthe information content of equity prices as these markets were in general the largest and mostliquid at the time...

This paper asks why Asia-Pacific residents issue debt in offshore markets and considers the implications for domestic debt markets. We use unit record data for bond issuance by non-government residents of Australia, Hong Kong, Korea, Japan and Singapore to link the decision to issue offshore to...