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Too-Systemic-To-Fail : What Option Markets Imply About Sector-Wide Government Guarantees
Kelly, Bryan T. - 2015
We examine the pricing of financial crash insurance during the 2007-2009 financial crisis in U.S. option markets, and we show that a large amount of aggregate tail risk is missing from the cost of financial sector crash insurance during the crisis. The difference in costs between...
Persistent link: https://www.econbiz.de/10013038170
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Too-Systemic-To-Fail : What Option Markets Imply About Sector-Wide Government Guarantees
Kelly, Bryan T. - 2015
We examine the pricing of financial crash insurance during the 2007-2009 financial crisis in U.S. option markets, and we show that a large amount of aggregate tail risk is missing from the cost of financial sector crash insurance during the crisis. The difference in costs between...
Persistent link: https://www.econbiz.de/10013038266
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What Fed funds futures tell us about monetary policy uncertainty
Fontaine, Jean-Sébastien - 2016
The uncertainty around future changes to the Federal Reserve target rate varies over time. In our results, the main … driver of uncertainty is a "path" factor signaling information about future policy actions, which is filtered from federal … funds futures data. The uncertainty is highest when it signals a loosening cycle. The uncertainty raises the risk premium in …
Persistent link: https://www.econbiz.de/10011576374
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Best friend or worst enemy? : dynamics and multiple equilibria with financial arbitrage, production and collateral constraints
Zhang, Quan - 2017 - Last update: March 23, 2017
We develop a tractable model to study the macroeconomic impacts of limited arbitrage by linking arbitrage activities with the macroeconomy through collateralization. We show that the interactions between speculative trading and the business cycle can work as a powerful transmission mechanism,...
Persistent link: https://www.econbiz.de/10011626467
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Risks and Their Rewards in Financial Markets : A Two Price Perspective
Madan, Dilip B. - 2017
Prices in financial markets must move continuously and surprisingly to support their levels with returns. Consequently the function announcing the arrival rate of moves of different sizes becomes the equilibrium object, necessitating a reformulation of risk reward concepts in these terms. It is...
Persistent link: https://www.econbiz.de/10012967217
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Climate-linked bonds
Broeders, Dirk; Dimitrov, Daniel; Verhoeven, Niek - 2025
Climate-linked bonds, issued by governments and supranational organizations, are pivotal in advancing towards a net-zero economy. These bonds adjust their payoffs based on climate variables such as average temperature and greenhouse gas emissions, providing investors a hedge against long-term...
Persistent link: https://www.econbiz.de/10015181854
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Factor Investing, Learning from Prices, and Endogenous Uncertainty in Asset Markets
Dim, Chukwuma; Sangiorgi, Francesco; Vilkov, Grigory - 2021
We study learning and uncertainty under the factor investing paradigm using an endogenous information model with …, increasing systematic uncertainty and incentivizing learning about the systematic risk. This learning complementarity leads to … multiple regimes in systematic uncertainty and attention allocation. We specify and estimate a model-based, forward …
Persistent link: https://www.econbiz.de/10013247042
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Systemic risk and the refinancing ratchet effect
Khandani, Amir E.; Lo, Andrew W.; Merton, Robert C. - 2009 - This draft: September 13, 2009
The confluence of three trends in the U.S. residential housing market - rising home prices, declining interest rates, and near-frictionless refinancing opportunities - led to vastly increased systemic risk in the financial system. Individually, each of these trends is benign, but when they occur...
Persistent link: https://www.econbiz.de/10003889053
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Are Regime Shift Risks Priced in Asset Markets?
Chourdakis, Kyriakos - 2011
In this paper we introduce a discrete time pricing model for a European call option when the log-return of the underlying stock (asset) is subject to discontinuous market regime type of shifts in its mean or volatility whose risk can be priced in the market. The paper shows how to estimate this...
Persistent link: https://www.econbiz.de/10013130931
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Extracting Tail Risk from High-Frequency S&P 500 Returns
Almeida, Caio - 2020
-sectional analysis is robust to the inclusion of uncertainty indexes, as well as macroeconomic and volatility measures …
Persistent link: https://www.econbiz.de/10012851891