In this paper we propose a new security, the Call Option Enhanced Reverse Convertible (COERC). The security is a form of contingent capital, i.e. a bond that converts into equity when the market value of equity relative to debt falls below a certain trigger. The conversion price is set...

Using an equilibrium asset and option pricing model in a production economy under jump diffusion, we derive an analytical link between the equity premium, risk aversion and the systematic variance and skewness risk premium. In an empirical application of the model using more than 20 years of...

This paper explores whether knowledge of the time-series properties of the premium in the pricing of forward foreign exchange can be usefully exploited in forecasting future spot exchange rates. Signal-extraction techniques, based on recursive application of the Kalman filter, are used to...

In this article, a survey database of exchange rate expectations is employed to examine EMS exchange risk premia. We are able to test a risk premium model directly, i.e. without having to rely on the rational expectations assumption. The results indicate that time-varying risk premia are almost...