The CDS-bond basis quantifies the difference in risk premia between credit default swap (CDS) and bond markets. It is hard to measure at the individual firm level given substantial missing-value problems (30%-100%) in either or both markets, even for highly liquid blue-chip financial firms. We...

Discount is the difference between the face value of a bond and its present value. I propose an arbitrage-free dynamic framework for discount models, which provides an alternative to the Heath–Jarrow–Morton framework for forward rates. I derive general consistency conditions for factor...

In this paper, we used modified multivariate EGARCH-M models to assess the relation between the equity risk premium, macroeconomic risk, and inflationary expectations. To rationalise this link between equity risk premia and macroeconomic volatilities, we built our empirical study on the...

We build a novel macro-finance model that combines a semi-structural macroeconomic module with arbitrage-free yield-curve dynamics. We estimate it for the United States and the euro area using a Bayesian approach and jointly infer the real equilibrium interest rate (r*), trend inflation (π*),...

Statistical learning models have profoundly changed the rules of trading on the stock exchange. Quantitative analysts try to utilise them predict potential profits and risks in a better manner. However, the available studies are mostly focused on testing the increasingly complex machine learning...

We develop a Bayesian Markov chain Monte Carlo algorithm for estimating risk premia in dynamic stochastic general equilibrium (DSGE) models with stochastic volatility. Our approach is fully Bayesian and employs an affine solution strategy that makes estimation of large-scale DSGE models...

We represent risk factors as sums of orthogonal components capturing fluctuations with cycles of different length. The representation leads to novel spectral factor models in which systematic risk is allowed (without being forced) to vary across frequencies. Frequency-specific systematic risk is...

This paper provides novel insights into the dynamic properties of variance and semivariance premia. Considering nine international stock market indices, we find consistent evidence of significantly negative total and downside (semi)variance premia of around -15 bps per month. These premia almost...

We show that a business-cycle component of consumption growth (dubbed business-cycle consumption) with cycles between 2 and 4 years is effective in explaining the differences in risk premia across alternative test assets, including recently-proposed anomaly portfolios. We formalize the mapping...

We study an equilibrium risk and return model to explore the effects of the coronavirus crisis and associated skewness. We derive the moment and equilibrium equations, specifying skewness price of risk as an additive component of the effect of variance on mean expected return. We estimate our...