We propose a novel measure of risk perceptions: the price of volatile stocks (PVSt), defined as the book-to-market ratio of low-volatility stocks minus the book-to-market ratio of high-volatility stocks. PVSt is high when perceived risk directly measured from surveys and option prices is low....

This paper derives approximate analytical solutions for various financial assets in the production economy with monetary shocks. Both technology and monetary shocks drive the dynamics of various financial assets. Special cases of permanent and transitory shocks are considered.The solutions based...

This paper studies the contribution of limited asset market participation to the variability of real interest rates in the UK. Using a quadratic term structure model of real interest rates in an economy with endogenously segmented asset markets, I estimate the contribution of money and real...

We develop a two-layer asset pricing framework to analyze the fragility of the corporate bond market. In the model, households allocate wealth to institutional investors such as mutual funds and insurance companies. Institutional investors then allocate funds to specific assets. Equilibrium...

We examine asset prices in environments where the risk-free rate lies considerably below the growth rate. To do so, we introduce a tractable model of a production economy featuring heterogeneous trading technologies, as well as idiosyncratic and aggregate risk. We show that allowing for the...

This paper studies how non-Gaussian shocks affect risk premia in DSGE models approximated to second and third order. Based on an extension of the work by Schmitt-Grohe and Uribe to third order, we derive propositions for how rare disasters, stochastic volatility, and GARCH affect any risk premia...

This paper examines the possibility of applying two most popular parametric yield curve models (Nelson-Siegel and Svensson) in the Croatian financial market. In such an illiquid and undeveloped financial market yield curve modeling presents a special challenge primarily regarding the available...

This paper investigates the power of macroeconomic factors to explain euro area bond risk premia using (i) a big dataset (ii) the Elastic Net variable selection. We find that macroeconomic factors, in particular economic activity and sentiment indicators, explain 40% of the variability of risk...

This paper investigates the power of macroeconomic factors to explain euro area bond risk premia using (i) a large dataset that captures the nowadays data-rich environment (ii) the Elastic Net variable selection. We find that macroeconomic factors, in particular economic activity and sentiment...