We investigate the cross-sectional relation between dividend yield and expected return and attempt to include various effects of changing risk measure and changing risk premiums. A stock’s risk is measured by its sensitivities to two factors, a market factor and a changing-risk-premium factor....

This paper investigates the properties of contingent claim prices in a one dimensional diffusion world and establishes that (i) the delta of any claim is bounded above (below) by the sup (inf) of its delta at maturity, and (ii), if its payoff is convex (concave) then its current value is convex...