When investors have incomplete information, expected returns, as measured by an econometrician, deviate from those predicted by standard asset pricing models by including a term that is the product of the stock's idiosyncratic volatility and the investors' aggregated forecast errors. If...

We show in a fairly general setting of a buyer and seller with the same preferences trading two related assets so as to share volatility risk that illiquidity and virtually all impediments to trade cannot be priced. This is because the buying and selling counterparties must both be optimizing....

I show in a setting of a buyer and seller with the same preferences trading two related assets so as to share volatility risk that illiquidity and virtually all impediments to trade cannot be priced in the absence of excess short-selling costs. This is because the buyer values the asset at the...

We develop a model of investment, payout, and financing policies in which firms face uncertainty regarding their ability to raise funds and have to search for investors when in need of capital. We show that capital supply uncertainty leads firms to value financial slack and to adjust their...

In this article, the market risk associated with the financial markets of New York and Colombia is evaluated in three periods belonging to the 2019-2020-time window, characterized by shocking economic and social conditions such as the oil price war between Saudi Arabia and Russia and the global...

Whether higher idiosyncratic return volatility means more or less informative stock prices is an ongoing debate. All the existing literature relies on cross-sectional evidence, which makes it hard to isolate the effects of price informativeness on idiosyncratic volatility from other effects. I...

This paper presents a new transform-based approach for path-independent lattice construction for pricing American options under low-dimensional stochastic volatility models. We derive multidimensional transforms which allow us to construct efficient path-independent lattices for virtually all...

The exchange rate plays vital role in the financial market and its importance is increasing in the developing economies. Exchange rate volatility is an important factor to consider in decision making by the investors as the interest of global investment community is increasing in assets market...

The economic and political developments of the past years show an increasing importance of a possible risk-reducing of the company due to good ESG performance. Our work contributes by examining the impact of relatively better ESG performance of companies on their implied and historical share...

We assess investment value of sell-side analyst recommendations from the standpoint of portfolio risk. We match I/B/E/S consensus recommendations issued for U.S.-listed equities during January 2015 with realized volatility of daily security returns up to one year following recommendation issue....