credit risk-premium to model spikes in CDS rates during stressed market conditions. We develop the statistical evidence for …

issuers, we provide evidence to support a statistically significant negative downgrade risk premium in excess returns …, suggesting that stocks at higher risk of failure tend to deliver lower returns. The performance of the model remains robust …

a decrease in bank equity risk. We show theoretically, that keeping less capital in excess of the minimum capital … requirement can outweigh the risk-reducing effect on equity of increased total capitalization. Empirically, we find that excess … capitalization is a significant determinant of equity risk, and can explain why bank equity risk has not become lower after the Great …

We propose a method to extract individual firms' risk-neutral return distributions by combining options and credit …. Jointly, options and CDS span the intermediate part of the distribution, which is driven by moderate-sized jump risk. We study … the returns on a trading strategy that buys (sells) stocks exposed to positive (negative) moderate-sized jump risk …

asset prices reflect both covariance risk and misperceptions of firmsapos prospects, and in which arbitrageurs trade against … mispricing. In equilibrium, expected returns are linearly related to both risk and mispricing measures (e.g., fundamental …