Most stock exchange regulators around the world reacted to the 2007-2009 crisis by imposing bans or regulatory constraints on short-selling. Short-selling restrictions were imposed and lifted at different dates in different countries, often applied to different sets of stocks and featured...

We develop a model of financially constrained arbitrage, and use it to study the dynamics of arbitrage capital, liquidity, and asset prices. Arbitrageurs exploit price discrepancies between assets traded in segmented markets, and in doing so provide liquidity to investors. A collateral...

This paper introduces a new model-free approach to measuring the expectation of market variance using VIX derivatives. This approach shows that VIX derivatives carry different information about future variance than S&P 500 (SPX) options, especially during the 2008 financial crisis. I find that...

This paper presents time-varying contagion indices of credit risk spillover and feedback between 64 financials and sovereigns in the euro area, where spillover is identified based on bilateral Granger causality regressions. Over-identification of contagion between financials' true credit risk...

Financial decision makers often consider the information in currency option valuations when making assessments about future exchange rates. The purpose of this paper is to systematically assess the quality of option based volatility, interval and density forecasts. We use a unique dataset...

We find that firm-level variance risk premium, estimated as the difference between option-implied and expected variances, has a prominent explanatory power for credit spreads in the presence of market- and firm-level risk control variables identified in the existing literature. Such a...

Volatilities implied from interest rate swaptions are used to assess the size and the sign of the compensation for volatility risk, for dollar, euro and pound rates at a daily frequency, between October 1998 and August 2006. The measurement of the volatility risk premium rests on a simple model...

This paper investigates the market pricing of subprime mortgage risk on the basis of data for the ABX.HE family of indices, which have become a key barometer of mortgage market conditions during the recent financial crisis. After an introduction into ABX index mechanics and a discussion of...

This paper contributes new evidence on market pricing of rating changes. We examine the relation between spreads and ratings for a very large and comprehensive sample of corporate bonds, which allows us to test for country- and industry-specific effects, as well as to explore the differences...

In this paper we study risk-neutral densities (RNDs) for the German stock market. The use of option prices allows us to quantify the risk-neutral probabilities of various levels of the DAX index. For the period from December 1995 to November 2001, we implement the mixture of log-normals model...