Empirical measures of world consumption growth risk have failed to rationalize the cross-section of country equity returns. We propose a new factor, termed "the global consumption factor", to explain the patterns in risk premiums on international equity markets. We identify this factor as the...

We investigate the effects of introducing a central clearing counterparty (CCP) on securities prices by adopting as an experimental construct the 2009 CCP reform in three Nordic markets. We find that, relative to other European economies, these countries experience market-adjusted equity returns...

One of the fastest growing areas in empirical finance, and also one of the least rigorously analyzed, especially from a financial econometrics perspective, is the econometric analysis of financial derivatives, which are typically complicated and difficult to analyze. The purpose of this special...

The term structure of interest rates does not adhere to the expectations hypothesis, possibly due to a risk premium. We consider the implications of a risk premium that arises from endogenous market segmentation driven by variable inflation rates. In the absence of autocorrelation in inflation,...

The forward premium puzzle (FPP) is the negative correlation between the forward premium and the realized exchange rate return at maturities of a month and beyond. Some recent evidence shows that at maturities of multiple years and at the highest intra day frequency the correlation is positive...

This paper examines the pricing of public debt in a quantitative macroeconomic model with government default risk. Default may occur due to a fiscal policy that does not preclude a Ponzi game. When a build-up of public debt makes this outcome inevitable, households stop lending such that the...

This paper investigates why the forward premium predicts the future depreciation with the "wrong" sign and why the unobserved deviation from rational uncovered interest parity is negatively correlated with and is more volatile than the rationally expected depreciation. We examine the ability of...