Equity options display a strong factor structure. The first principal components of the equity volatility levels, skews … have higher implied volatilities, steeper moneyness slopes, and a term structure that co-varies more with the market. The …

option prices. The price of co-skewness risk corresponds to the market variance risk premium, and the price of co …-kurtosis risk corresponds to the market skewness risk premium. Option-based estimates of the prices of risk lead to reasonable … values of the associated risk premia. An out-of-sample analysis of factor models with co-skewness and co-kurtosis risk …

regularities in equity, credit, and options markets. Our model captures the empirical level and volatility of credit spreads … matches high-yield and CDO tranche spreads, equity market moments, and index option skewness. Finally, our model implies a …