I show that an asset pricing model for the equity claims of a value-maximizing firm can be constructed from its optimal financial contracting behavior. I study a dynamic contracting model in which firms trade off the costs and benefits of a given promise to pay external lenders in a specific...

In this paper, I introduce the modeling of currency returns conditional on the interest rate differential and the real exchange rate under the assumption that FX returns are skew-t distributed. Beyond the well-known relationship between the currency risk premium and its risk factors, I document...

The paper discusses the lower partial moments for the return of the investment portfolio which consists of the assets whose random incomes are modeled by variance-gamma, gamma distributions and constants.The formulas depend on values of generalized hypergeometric functions. As a corollary, the...

According to general asset pricing theory, options should reward their holders for the systematic risk they are bearing. In this paper, we study the returns of foreign exchange options. We find that, by sorting options according to the distance of their implied volatility from the historical...

This paper introduces a multivariate pure-jump Lévy process which allows for skewness and excess kurtosis of single asset returns and for asymptotic tail dependence in the multivariate setting. It is termed Variance Compound Gamma (VCG). The novelty of my approach is that, by applying a...

We document the empirical fact that asset prices in the consumption-goods and investment-goods sector behave almost identically in the US economy. In order to derive the cyclical behavior of the equity returns in these two sectors, we consider a standard two-sector real-business cycle model with...

This paper examines long-term price overreactions in various financial markets (commodities, US stock market and FOREX). First, t-tests are carried out for overreactions as a statistical phenomenon. Second, a trading robot approach is applied to test the profitability of two alternative...

This paper examines short-term price reactions after one-day abnormal price changes and whether they create exploitable profit opportunities in various financial markets. A t-test confirms the presence of overreactions and also suggests that there is an "inertia anomaly", i.e. after an...

This paper introduces a multivariate pure-jump Lévy process which allows for skewness and excess kurtosis of single asset returns and for asymptotic tail dependence in the multivariate setting. It is termed Variance Compound Gamma (VCG). The novelty of my approach is that, by applying a...

This paper evaluates if sentiment extracted from social media and options volume anticipates future asset return. Using both textual based data and a particular market data derived call-put ratio, between July 2009 and September 2012, this research shows that: 1) features derived from market...