This paper incorporates the dividend recovery feature into the variable disaster model of Gabaix (2012). The recovery redistributes risk to the short end and volatility to the long end, leading to the following equity term structures: (1) for one-period return, the average slope is downward with...

For each S&P 500 stock, I calculate the rolling correlation between the VIX and the premium of butterfly at different strikes. The butterfly that co-moves most positively with VIX reveals the expectation of the stock’s return in the future market crash. I call this return the Butterfly Implied...

Corporate bonds carry a premium of extreme illiquidity (EIL). This premium permeates all rating categories and heightens in times of stress and periods with high uncertainty. EIL has predictive power in the cross-section for future returns up to at least a one-year horizon. Active investors like...