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I empirically investigate whether macroeconomic uncertainty is a priced risk factor in the cross-section of equity and index option returns. The analysis employs a non-linear factor model, estimated with the Fama-MacBeth methodology, where the macroeconomic uncertainty factor is the return on a...
Persistent link: https://www.econbiz.de/10013097881
the value of the firm. For credit default swap prices and other quantities of interest, explicit expressions for the … credit default swap spreads. The time-dynamics of the model are studied, particularly the jumps in credit spreads, the …
Persistent link: https://www.econbiz.de/10013038582
We present a new option-pricing model, which explicitly captures the difference in the persistence of volatility under … Stochastic Volatility models have the best forecasting performance …
Persistent link: https://www.econbiz.de/10013014461
The shape of the VIX term structure conveys information about the price of variance risk rather than expected changes in the VIX, a rejection of the expectations hypothesis. A single principal component, Slope, summarizes nearly all this information, predicting the excess returns of S&P 500...
Persistent link: https://www.econbiz.de/10012937549
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
portfolio. The results reveal that market default risk is positively (negatively) related to the index risk-neutral volatility …
Persistent link: https://www.econbiz.de/10013095827
We propose a novel factor model for option returns. Option exposures are estimated nonparametrically and factor risk premia can vary nonlinearly with states. The model is estimated using regressions, with minimal assumptions on factor and option return dynamics. Using index options, we...
Persistent link: https://www.econbiz.de/10013213854
In this work we incorporate recovery risk into Merton's original credit risk model by introducing a separate risk driver for the recovery process and rationalize this new model within a "partial information" perspective. We show that while adding the recovery risk driver has no impact on...
Persistent link: https://www.econbiz.de/10013031099
Option-implied moments, like implied volatility, contain useful information about an underlying asset's return …
Persistent link: https://www.econbiz.de/10010399367
Option-implied moments, like implied volatility, contain useful information about an underlying asset's return …
Persistent link: https://www.econbiz.de/10013006232