We elaborate economic explanations for the time-varying risk of month, quarter and year base load electricity forward contracts traded on the Nord Pool Energy Exchange from January 2006 to March 2010. Daily risk quantities are generated by decomposing realized volatility in its continuous and...

In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a downward sloping term structure of low-frequency variance...

We contrast two different asset pricing models, where the pricing kernel either (i) increases in the volatility dimension, reflecting investors' aversion to volatility, or (ii) could be non-monotonic in volatility, reflecting heterogeneity in investors' beliefs. The two models yield opposite...

We use a unique, non-public dataset of individual trader positions in 17 U.S. commodity futures markets to provide novel evidence on those markets' financialization in the past decade. We then show that the correlation between the rates of return on commodities and equities rises amid greater...

We propose two new risk measures (i-beta and i-gamma) for a stock, which aim to distinguish between noise and information. Noise allows the stock price evolution to happen along a continuous path. Market wide economic information is transmitted via price jumps. Noise is idiosyncratic and does...

We propose a model of volatility tail behavior, in which the pricing measure dominates the physical measure in both tails of the volatility distribution and, hence, the derived pricing kernel exhibits an increasing and decreasing region in the volatility dimension. The model features investors...

We examine the pricing of volatility risk in the cross-section of equity Real Estate Investment Trust (REIT) stock returns over the 1996 – 2010 period. We consider both aggregate (systematic) volatility and firm-specific (idiosyncratic) volatility. In contrast to the negative and significant...

Prior research documents that volatility spreads predict stock returns. If the trading activity of informed investors is an important driver of volatility spreads, then the predictability of stock returns should be more pronounced during major information events. This paper investigates whether...

Prudent upper and lower valuations from the literature on arbitrage free two price economies provide risk characteristics driving required returns. The risk characteristics assess the risk of price fluctuations. The difference between the upper and lower prudent valuations can be viewed as a...

We show that log-dividends (d) and log-prices (p) are cointegrated, but, instead of de facto assuming the stationarity of the classical log dividend–price ratio, we allow the data to reveal the cointegration vector between d and p. We define the modified dividend–price ratio (mdp), as the...