We examine asset prices in a representative-agent model of general equilibrium. Assuming only that individuals are risk … averse, we determine conditions on the changes in asset risk that are both necessary and sufficient for the asset price to … incomplete in the sense of containing an uninsurable background risk, such as a risk on labor income. We extend our model to show …

boom yields consistently positive excess returns. This excess return compensates for the risk of high negative returns in … countries on risk aversion, and low (high) risk aversion currencies depreciate (appreciate) in times of global turmoil. …

Restrictions on the risk-pricing in dynamic term structure models (DTSMs) can unleash the power of no-arbitrage by … econometric framework for estimation of affine Gaussian DTSMs under restrictions on risk prices, which addresses the issues of a … the US Treasury yield curve. The data strongly favor tight restrictions on risk pricing: only level risk is priced, and …

-agents model with two main ingredients: i) rare disasters; ii) heterogeneous beliefs. The model captures time-varying risk premia …

asset prices and corporate default risk. Our model includes two empirically grounded nominal frictions: fixed nominal …

ante risk assessment and derive risk premia for every balance sheet item where liabilities are differentiated according to … priority rights. We find that risk premia reflect both idiosyncratic risk and risk of contagion (network risk). Moreover, we … show that network risk magnifies the gap between the risk premia of equity and debt. We also perform comparative statics …

-sectional fit of the yield curve. Second, we find that financial shocks, either in the form of liquidity or risk premium shocks …, additional liquidity-related and return forecasting factors. Liquidity factors are obtained from a decomposition of the TED … spread while the return-forecasting (risk premium) factor is extracted by imposing a single factor structure on the one …

equivalent beta becomes infinite for finite maturities. -- asset prices ; term structure ; risk premium ; certainty equivalent …

This paper provides evidence on the degree of persistence of one of the key components of the CAPM, namely the market … risk premium, as well as its volatility. The analysis applies fractional integration methods to data for the US, Germany … weekly). The empirical findings in most cases imply that the market risk premium is a highly persistent variable which can be …