In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a downward sloping term structure of low-frequency variance...

This paper implements a novel model-free methodology to measure skewness risk premia in individual stocks. The methodology takes the form of a trading strategy, a skewness swap. The return on the strategy shows a significant positive skewness risk premium in individual stocks. The risk premium...

We construct risk-neutral return probability distributions from S&P 500 options data over the decade 2003 to 2013, separable into pre-crisis, crisis and post-crisis regimes. The pre-crisis period is characterized by increasing realized and, especially, option-implied returns. This translates...

In this paper, we consider block trading strategies and characterize the times when a block trade is a popular choice. We also study the economic relevance of optimal liquidation strategies by calibrating a recent and realistic microstructure model with data from the Paris Stock Exchange. We...

We study survival, price impact and portfolio impact in heterogeneous economies. We show that, under the equilibrium risk-neutral measure, long-run price impact is in fact equivalent to survival, whereas longrun portfolio impact is equivalent to survival under an agent-specific, wealth-forward...

A major obstacle for research in international asset pricing and corporate finance has been a lack of reliable and publicly available data on international common risk factors and portfolios. To address this gap, we provide a step-by-step description of how appropriately screened data from...

In this paper, dynamic option-based investment strategies are derived and illustrated for investors exhibiting downside loss aversion. The problem is solved in closed form when the stock market exhibits stochastic volatility and jumps. The specification of downside loss averse utility functions...

Recent literature suggests that trading by institutional investors may affect the first and second moments of returns. Elaborating on this intuition, we conjecture that arbitrageurs can propagate liquidity shocks between related markets. The paper provides evidence in this direction by studying...

The aim of this study is to examine whether securitized real estate returns reflect direct real estate returns or general stock market returns using international data for the U.S., U.K., and Australia. In contrast to previous research, which has generally relied on overall real estate market...

We propose a technique to avoid spurious detections of jumps in high-frequency data via an explicit thresholding on available test statistics. We prove that it eliminates asymptotically all spurious detections. Monte Carlo results show that it performs also well in finite samples. In Dow Jones...