This paper shows that low risk anomalies in the CAPM and in traditional factor models arise when investors require … compensation for coskewness risk. Empirically, we find that option-implied ex-ante skewness is strongly related to ex-post residual …

. The pooling and tranching of credit assets relaxes both the funding and the risk constraints financial entities face … allowing them to increase balance sheet holdings. This increase in asset demand depresses the compensation for undertaking risk … in the economy, confirming our empirical results. Crucially, we show that declines in the compensation for risk taking in …

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 …

ante risk assessment and derive risk premia for every balance sheet item where liabilities are differentiated according to … priority rights. We find that risk premia reflect both idiosyncratic risk and risk of contagion (network risk). Moreover, we … show that network risk magnifies the gap between the risk premia of equity and debt. We also perform comparative statics …

Over the past few years the CDS market's role has evolved from mostly providing default protection towards credit risk … (default-free) risk-free benchmark (i.e. bearing interest rate risk only) to sovereign debt as a credit risk asset. Therefore … allocation to risk management. This implies that some policy issues are not necessarily and exclusively related to the CDS market …

assessed. We propose a novel framework to assessfinancial system risk. Using a dynamic factor framework based on state …-space methods, we model latent macro-financial and credit risk components for a large data setcomprising the U.S., the EU-27 area … risk conditions can significantly and persistently de-couplefrom macro-financial fundamentals. Such decoupling can serve as …