This study calibrates the term structure of risk premia before and during the 2007/2008 financial crisis using a new … calibration approach based on credit default swaps. The risk premium term structure was flat before the crisis and downward … sloping during the crisis. The instantaneous risk premium increased significantly during the crisis, whereas the long-run mean …

When people share risk in financial markets, intermediaries provide costly enforcement for most trades and, hence, are … an integral part of financial marketsu0092 organization. We assess the degree of risk sharing that can be achieved … allow for optimal risk sharing as long as markets are complete, default is prevented in equilibrium and intermediaries …

In this paper we study risk-neutral densities (RNDs) for the German stock market. The use of option prices allows us to … quantify the risk-neutral probabilities of various levels of the DAX index. For the period from December 1995 to November 2001 …, the US stock markets and credit risk. We find that the risk-neutral densities exhibit pronounced negative skewness. Our …

This paper analyzes the efficiency of risk-taking decisions in an economy that is prone to systemic risk, captured by … unconstrained access to a complete set of Arrow securities choose to expose themselves to such risk to a socially inefficient extent … employ ex-ante risk markets to fully undo any expected government bailout. Finally, it finds that constrained market …