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The variance risk premium represents the compensation paid to index option sellers for the risk of losses following upward movements in realized market return volatility. Common wisdom connects these spikes with elevated uncertainty on economic fundamentals. I incorporate this link within a...
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This paper studies the implications of perceived default risk for aggregate output and productivity. Using a model of … credit across firms with heterogeneous productivity. Further, we find that these losses accounted for over half of the … productivity fall between 2008 and 2009, and persisted for smaller (although not larger) firms. …
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