Recently a market in options based on CPI inflation (inflation caps and floors) has emerged in the US. This paper uses quotes on these derivatives to construct probability densities for inflation. We study how these pdfs respond to news announcements, and find that the implied odds of deflation...

This study investigates if market risk-based capital requirements (MRR) implemented in 1998 mitigated bank risk associated with trading activities. Recognizing that only banks with sufficiently high trading activities are subject to the MRR (regulated), we implement a difference-in-difference...

In our asymmetric-information asset pricing model, commonality in uninformed trading translates into a transient factor in returns. The factor is capable of simultaneously producing negative signs of return cross-autocorrelations, a feature that we document in data, and excess comovement in...

In our asymmetric-information asset pricing model, commonality in uninformed trading translates into a transient factor in returns. The factor is capable of simultaneously producing negative signs of return cross-autocorrelations, a feature that we document in data, and excess comovement in...

Recently a market in options based on CPI inflation (inflation caps and floors) has emerged in the US. This paper uses quotes on these derivatives to construct probability densities for inflation. We study how these pdfs respond to news announcements, and find that the implied odds of deflation...

To study the welfare implications of rising temperature we propose a temperature-augmented long-run risks model that accounts for the interaction between temperature, economic growth and risk. The model simultaneously matches the projected temperature path, the observed consumption growth...

This article makes a contribution towards understanding the impact of temperature fluctuations on the economy and financial markets. We present a long-run risks model with temperature related natural disasters. The model simultaneously matches observed temperature and consumption growth...

We use the forward-looking information from the US and global capital markets to estimate the economic impact of global warming, specifically, long-run temperature shifts. We find that global warming carries a positive risk premium that increases with the level of temperature and that has almost...