We propose a structural model for durations between events and (a vector of) associated marks, using a multivariate Brownian motion. Successive passage times of one latent Brownian component relative to random boundaries define durations. The other, correlated, Brownian components generate the...

We develop an Arbitrage Pricing Theory framework extension to study the pricing of squared returns/volatilities. We analyze the interplay between factors at the return level and those in idiosyncratic variances. We confirm the presence of a common idiosyncratic variance factor, but do not find...

Time-varying leverage driven by common shocks to firm asset returns introduces a factor structure in idiosyncratic equity return volatilities (IVOL). In a standard dynamic capital structure model in which the CAPM holds for asset returns, we show that three factors explain the IVOL...

Asymmetric shocks are common in markets; securities'; payoffs are not normally distributed and exhibit skewness. This paper studies the portfolio holdings of heterogeneous agents with preferences over mean, variance and skewness, and derives equilibrium prices. A three funds separation theorem...

The early work of Tobin (1958) showed that portfolio allocation decisions can be reduced to a two stage process: first decide the relative allocation of assets across the risky assets, and second decide how to divide total wealth between the risky assets and the safe asset. This so called...