tractability. Nevertheless, the formula is useful for evaluating many types of risk …

the mean and volatility of equity returns. Our model assumes a small risk of a rare disaster that is calibrated based on … the international data on large consumption declines. We allow the risk of this rare disaster to be stochastic, which …

risk is the dominant force, the size distribution of disasters follows a power law, and the economy has a representative … difference between the power-law tail parameter and the coefficient of relative risk aversion, γ. The options-pricing formula …

demanding a premium for hedging risk. This paper examines the consistency of those explanations with returns on dynamically … on synthetic options -- with the variance risk premium shrinking towards zero -- while various drivers of the cost and … risk of hedging options exposures have declined, consistent with a model in which intermediaries drive option prices …

that pay-to-performance incentives for risk-averse undiversified executives are typically maximized by setting exercise …