government risk facing investors in medical innovation. This risk slows down medical innovation because investors must be …&D investors to better share the pipeline risk associated with FDA approval with broader capital markets. Using historical FDA … from offering them. Using various unique data sources, we find that FDA approval risk has a low correlation across drug …

comparable to that of returns in stock markets. Evidence is shown that there may be only minimal possibility of cross hedging … examined. Such markets, by allowing hedging of these aggregate income risks, might make for dramatically more effective … international macroeconomic risk sharing than is possible today. Retail institutions are described that might develop around such …

climate risk beliefs. We exploit two types of idiosyncratic belief shocks: (i) instances when fund advisers experience local … hedge portfolios for aggregate unemployment and house price risk …

We propose and implement a procedure to dynamically hedge climate change risk. To create our hedge target, we extract … hedge portfolios. We discipline the exercise by using third-party ESG scores of firms to model their climate risk exposures …. We show that this approach yields parsimonious and industry-balanced portfolios that perform well in hedging innovations …

risks. Portfolios hedging macro uncertainty have historically earned zero or even significantly positive returns, while … a simple extension of the long-run risk model …

the unpriced risk. We apply our methodology to hedge out unpriced risk in the Fama and French (2015) five-factors. We find …

Typical value-at-risk (VAR) calculations involve the probabilities of extreme dollar losses, based on the statistical … VAR values that are adjusted for risk aversion, time preferences, and other variations in economic valuation. In the … context of a representative agent equilibrium model, we construct an estimator of the risk-aversion coefficient that is …

Transaction costs in trading involve both risk and return. The return is associated with the cost of immediate … execution and the risk is a result of price movements during a more gradual trading. The paper shows that the trade-off between … risk and return in optimal execution should reflect the same risk preferences as in ordinary investment. The paper develops …

This paper provides an empirical analysis of the risk of trading revenues of U.S. commercial banks. We collect … quarterly data on trading revenues, broken down by business line, as well as the Value at Risk-based market risk charge. The … across business lines. These low correlations do not corroborate systemic risk concerns. Neither is there evidence that the …

In Merton (1987), idiosyncratic risk is priced in equilibrium as a consequence of incomplete diversification. We modify … results in a state-dependent idiosyncratic risk premium that is higher when average idiosyncratic volatility is low, and vice …