Branger, Nicole; Kraft, Holger; Meinerding, Christoph - 2013 - This version: March 13, 2013
This paper analyzes the equilibrium pricing implications of contagion risk in a Lucastree economy with recursive … implications. The risk premium for such shocks is superadditive, i.e. it is 2.5% larger than the sum of the risk premia for pure … endowment shocks and regime switches. Moreover, contagion risk reduces the risk-free rate by around 0.5%. We also derive …