We review the theory of leverage developed in collateral equilibrium models with incomplete markets. We explain how … how it depends on volatility. We describe the dynamic feedback properties of leverage, volatility, and asset prices, in …

A recent literature shows how an increase in volatility reduces leverage. However, in order to explain pro …-cyclical leverage it assumes that bad news increases volatility, that is, it assumes an inverse relationship between first and second … volatility. We show that, in a model with endogenous leverage and heterogeneous beliefs, agents have the incentive to invest …

A recent literature shows how an increase in volatility reduces leverage. However, in order to explain pro …-cyclical leverage it assumes that bad news increases volatility, that is, it assumes an inverse relationship between first and second … volatility. We show that, in a model with endogenous leverage and heterogeneous beliefs, agents have the incentive to invest …

asset to the riskless rate of interest. Finally, our Binomial Leverage-Volatility theorem provides a precise link between … leverage and volatility. …

In theory, by trading options, market participants asses and set future volatilities that can be identified using the … volatility of the past nine weeks with that of the following nine weeks, estimation error ranges from four to over ten percentage …

We propose an asset pricing model with generalized disappointment aversion preferences and long-run volatility risk …

growth and volatility. My setup allows consumption dynamics to be estimated jointly with covariance risk prices in a single … consumption volatility are the key driver for explaining major asset pricing anomalies across risk horizons, while other factors …

filtered using EGARCH specifications. The estimation results show that upgrades do not have significant effects on volatility …, but downgrades increase stock and bond market volatility. Contagion is present, with sovereign rating announcements … (increase) in volatility in other countries. The empirical results show also a financial gain and risk (value-at-risk) reduction …

We use portfolio theory to quantify the efficiency of state-level sectoral patterns of production in the United States … volatility of state output growth, rather than in its average. The realized industry shares of output also converge faster to …