Dynamic correlation models demonstrate that the relationship between interest rates and housing prices is non-constant. Estimates reveal statistically significant time fluctuations in correlations between housing price indexes and Treasury bonds, the S&P 500 Index, and stock prices of...

This paper defines the rate of substitution of one stochastic change to a random variable for another. It then focuses on the case where one of these changes is an nth degree risk increase, and the other is an mth degree risk increase, where nm⩾1. The paper shows that the rate of substitution...

The unprecedented collapse of international interbank borrowing was a prominent feature of the global financial crisis that started in August 2007. This paper focuses on the drivers of the retrenchment from 32 advanced and emerging banking systems. Using novel risk-weighted indexes the paper...

Generally, in the standard presentation of the expected utility model, the risk premium represents how much a risk-averse decision maker is ready to pay to have a risk eliminated. Here, however, we introduce a different risk premium: how much should a risk (which could be the return on a...

We explore the macro/finance interface in the context of equity markets. In particular, using half a century of Livingston expected business conditions data we characterize directly the impact of expected business conditions on expected excess stock returns. Expected business conditions...

This paper introduces and investigates the concept of repetitive risk aversion. The risk aversion of an increasing and concave utility function is repetitive if the fear of ruin, which measures agent's aversion to risking his entire income, is also increasing and concave. This is shown to be...