the model, the risk-free bond motion and classical GBM are time-changed by an inverted inverse Gaussian (IG) subordinator …

While empirical literature has documented a negative relation between default risk and stock returns, the theory … suggests that default risk should be positively priced. We provide an explanation for this "default anomaly", by calculating … components. The systematic part, measured as the PD sensitivity to aggregate default risk, is positively related to stock returns …

discovery. We document that out-of-themoney (OTM) option prices, which determine the Risk-Neutral Skewness (RNS) of the … risk. These findings are consistent with a trading mechanism where investors choose to exploit perceived stock underpricing …