Bitcoin Pricing Kernels (PK) are estimated using a novel data set from Deribit, one of the largest Bitcoin derivatives exchanges. The PKs improve the understanding of investor sentiment and risk premia. Bootstrap-based confidence bands are estimated in order to validate the results. Investors...

We construct risk-neutral return probability distributions from S&P 500 options data over the decade 2003 to 2013, separable into pre-crisis, crisis and post-crisis regimes. The pre-crisis period is characterized by increasing realized and, especially, option-implied returns. This translates...

Hundreds of studies have always shown that the forward premium is a biased predictor of the future change in the spot exchange rates; they have all tested major currencies with the exception of a recent research that has been undertaken in 2010 by Frankel and Poonawala and which instigates us to...

These days it's become convention (reinforced by the media's treatment of wealth) to assess our net worth by tallying up the market value of our financial assets, even though it's more natural and useful to think of our wealth as a stream of dollars over time given the nature of our income and...

The longest bull market in US stock market history is over. Uncertainty over the public health and economic impact of the coronavirus pandemic will keep markets extremely volatile, making it likely we'll touch a wide range of price levels in the months ahead. Amidst such uncertainty, it's a...

This article develops a model that takes into account skewness risk in risk parity portfolios. In this framework, asset returns are viewed as stochastic processes with jumps or random variables generated by a Gaussian mixture distribution. This dual representation allows us to show that skewness...

The capital asset pricing model (CAPM) developed by Sharpe (1964) is the starting point for the arbitrage pricing theory (APT). It uses a single risk factor to model the risk premium of an asset class. However, the CAPM has been the subject of important research, which has highlighted numerous...

This paper analyses the pricing of systematic risk factors in credit default swap contracts in a two-stage empirical framework. In the first pass, we estimate contract-specific sensitivities to several systematic risk factors by time-series regressions using quoted credit default swap (CDS)...

Momentum risk premium is one of the most important alternative risk premia. Since it is considered a market anomaly, it is not always well understood. Many publications on this topic are therefore based on backtesting and empirical results. However, some academic studies have developed a...

Forward rates in the money market are systematically higher than realised spot rates, reflecting an unobservable term premium. This paper uses a Kalman filter specification to produce time-varying estimates of the term premia in New Zealand and Australia. Three time series specifications are...