A new options-pricing formula applies to far-out-of-the money put options on the overall stock market when disaster … multiplicative term that is proportional to the disaster probability, p. If γ and the size distribution of disasters are fixed, time … variations in p can be inferred from time fixed effects. The estimated disaster probability peaks particularly during the recent …

down, are the proportionate effect of environmental investment on the probability of environmental disaster and the … baseline probability of environmental disaster …

depression, this paper embeds a trade-off theory of capital structure into a real business cycle model with a small, time …-varying risk of large economic disaster. This simple feature generates large, volatile and countercyclical credit spreads as well … the disaster probability …

between consumption losses in a disaster and the risk premium, a small amount of risk sharing can significantly attenuate the … effect that disaster risk has on the equity premium. We characterize the sensitivity of risk premium to wealth distribution … lead to significant variation in disaster risk premium. It also highlights the conditions under which disaster risk premium …

shocks to aggregate uncertainty, I introduce a small, time-varying risk of economic disaster in a standard real business … cycle model. The paper establishes two simple theoretical results: first, when the probability of disaster is constant, the … risk of disaster does not affect the path of macroeconomic aggregates - a "separation theorem" between macroeconomic …