Theoretically, corporate debt is economically equivalent to safe debt minus a put option on the firm’s assets. We … by standard risk factors and unlikely to be solely due to illiquidity. Our option-based approach also offers a novel …

This paper uses contingent claim asset pricing and exploits capital structure priority to better understand the …-varying correlation between the aggregate stock market and government bonds, (ii) the use of bond factors for multifactor asset pricing …

We present a simple methodology that integrates commodity and asset pricing models. Given current evidence on the … financialization of commodity markets, valuable information about commodity risk premiums can be extracted from asset pricing models … methodology can be used with any pair of commodity and asset pricing models. An implementation of the methodology is presented …

option exercises, with volatility causing executives to hold their options longer in order to preserve remaining option value …

% per month, and the return differences persist up to six months. The cross section of stock returns also predicts option …-implied volatilities, with stocks with high past returns tending to have call and put option contracts which exhibit increases in implied …

average implied volatilities from option data. We resolve this inconsistency in a model with stochastic disaster risk (SDR …

pricing model. Using the preference structure from Campbell and Cochrane (1999), the model generates realistic time …, but also generates a realistic variance premium and option prices. …

absorbed by mortgage lenders by valuing the embedded put-option in non-recourse mortgages. Our simulations generate loss …