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...

We study general undiscounted asset price processes, which are only assumed to be non- negative, adapted and RCLL (but not a priori semimartingales). Traders are allowed to use simple (piecewise constant) strategies. We prove that under a discounting-invariant condition of absence of arbitrage,...

How do lenders use their reputation when participating in syndicated loans? I address this question by focusing on syndicate composition with respect to participants' reputation and its impact on loan spreads. I find that lender reputation enables it to compete in terms of choosing the types of...

We propose a dynamic asset-market equilibrium model in which (1) an "innovative" asset with as-yet-unknown average payoff is traded, and (2) investors delegate investment to experts. Experts secretly renege on investors' orders and take on leveraged positions in the asset to manipulate...

This paper seeks to inform about a feature of monetary policy that is largely overlooked, yet occupies a central role in modern monetary and financial systems, namely central bank collateral frameworks. Their importance can be understood by the observation that the money at the core of these...

We examine the relation between liquidity, volume, and volatility using a comprehensive sample of U.S. stocks in the post-decimalization period. For large stocks, effective spread and volume are positively related in the time series even after controlling for volatility, contrary to most...

In general multi-asset models of financial markets, the classic no-arbitrage concepts NFLVR and NUPBR have the serious shortcoming that they depend crucially on the way prices are discounted. To avoid this economically unnatural behaviour, we introduce a new way of defining “absence of...

We present a detailed bubble analysis of the Bitcoin to US Dollar price dynamics from January 2012 to February 2018. We introduce a robust automatic peak detection method that classifies price time series into periods of uninterrupted market growth (drawups) and regimes of uninterrupted market...

I show that an asset pricing model for the equity claims of a value-maximizing firm can be constructed from its optimal financial contracting behavior. I study a dynamic contracting model in which firms trade off the costs and benefits of a given promise to pay external lenders in a specific...

At odds with the common “rational expectations” framework for bubbles, economists like Hyman Minsky, Charles Kindleberger and Robert Shiller have documented that irrational behavior, ambiguous information or certain limits to arbitrage are essential drivers for bubble phenomena and financial...