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 …

leverage. State prices are estimated using the flexible risk-neutral density method of Rosenberg (1995) and a daily cross … risk aversion over S&P500 return states is substantially higher than risk aversion implied by Black-Scholes state prices … and probabilities using long run estimates of S&P500 return moments. It is also found that the daily level of risk …

/jump-diffusion processes when jump risk and volatility risk are systematic and nondiversifiable, thereby nesting two major option pricing …

generate log-symmetric stable price uncertainty. Our analysis is restricted to short-lived options for reasons of mathematical … tractability. Nevertheless, the formula is useful for evaluating many types of risk …

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 … countries. The analysis uses two types of data--indicative prices on OTC contracts offered by a large financial firm and market …

We develop a model of pandemic risk management and firm valuation. We introduce aggregate transmission shocks into an …