This paper decomposes the risk premia of individual stocks into contributions from systematic and idiosyncratic risks. I introduce an affine jump-diffusion model, which accounts for both the factor structure of asset returns and that of the variance of idiosyncratic returns. The estimation is...

We assess whether the euro had an impact first on the degree of integration of European financial markets, and, second, on the euro area term structure. We propose two methodologies to measure integration: one relies on time-varying GARCH correlations, and the other one on a regression...

The paper evaluates the implications of the Smets and Wouters (2004) DSGE model for the US yield curve. Bond prices are modelled in a way that is consistent with the macro model and the resulting risk premium in long term bonds is a function of the macro model parameters exclusively. When the...

The paper evaluates the implications of the Smets and Wouters (2004) DSGE model for the US yield curve. Bond prices are modelled in a way that is consistent with the macro model and the resulting risk premium in long term bonds is a function of the macro model parameters exclusively. When the...

During the 15 years prior to the global financial crisis the volume of securitized assets transacted in the US grew substantially, reflecting a change in the nature of the financial intermediation process. Together with increased securitization of assets, financial entities, who participate more...

After the announcement of the European Central Bank's corporate quantitative easing program, non-financial corporations timed the bond market by shifting their issuance toward bonds eligible for the program. However, issuers of eligible bonds did not increase total issuance compared to other...

Realized divergence gauges the distinct realized moments associated with time-varying uncertainty and is tradeable with divergence swaps engineered from delta-hedged option portfolios. Consistently with established notions of symmetry in arbitrage-free option markets, implied divergence...

There are concerns that climate-related physical and political risks are not yet properly reflected in asset prices. To address these concerns, we develop a dynamic asset pricing framework with two sources of rare disasters: macroeconomic events and climate change. We link carbon emissions and...

In the recent literature, increasing attention has been paid to cases when the shocks to a small number of firms would lead to large volatility in many sectors. Theorists find that supply chains play a role, as the shocks to a firm or a sector may propagate through the input–output linkages...

While empirical literature has documented a negative relation between default risk and stock returns, the theory suggests that default risk should be positively priced. We provide an explanation for this "default anomaly", by calculating monthly probabilities of default (PDs) for a large sample...