We propose a novel time-changed L évy LIBOR market model for the joint pricing of caps and swaptions. The time changes are split into three components. The first component allows us to match the volatility term structure, the second generates stochastic volatility, and the third one...

“Buy Now, Pay Later” (BNPL) and other forms of consumer credit create a wedge between consumption and payments. We introduce this wedge into a standard consumption-based asset pricing model (CCAPM). In equilibrium, the pricing kernel equals the marginal utility of consumption divided by the...

We propose an affi ne two-factor model for the pricing of single-tranche collateralized debt obligations by following the general top-down framework introduced in Filipovic et al. [2011]. Apart from being analytically tractable, this model has the feature that it incorporates a catastrophic risk...

This paper analyzes the term structure of interest rates in an exchange-only Lucas (1978) economy where consumers learn about a stochastic growth rate through observations of the endowment process and an external public signal. We allow for deluded consumers, who exaggerate the degree of...

This paper examines the impact of the EU Taxonomy's non-climate environmental criteria on the corporate credit risk term structure. We focus on infrastructure firm-level credit risk transmitted through CDS with differential maturities (e.g., ten-year minus one-year) in relation to biodiversity,...

We incorporate a latent stochastic volatility factor and macroeconomic expectations in an affine model for the term structure of nominal and real rates. We estimate the model over 1999-2016 on U.S. data for nominal and TIPS yields, the realized and implied volatility of T-bonds and survey...

We show that the difference between the natural rate of interest and the current level of monetary policy stance, which we label Convergence Gap (CG), contains information that is valuable for bond predictability. Adding CG in forecasting regressions of bond excess returns significantly raises...

How predictable are personal income tax rates in the U.S., and does household spending respond to news about future taxes even before the rates change? To answer these questions, this paper uses novel historical high-frequency data of tax-exempt municipal bonds and develops a model of the term...

We identify frictions in the market for liquidity as well as bank-specific and market-wide factors that affect the prices that banks pay for liquidity, captured here by borrowing rates in repos with the central bank and benchmarked by the overnight index swap. We have price data at the...

This paper examines a canonical stochastic overlapping generations model with dynamically complete markets. Belief differences lead agents to place bets against each other and so wealth shifts across agents and across generations. Such changes in the wealth distribution strongly affect prices of...