We develop a zero beta industry model of growth options to explain the conflicting empirical findings on the relation between stock returns and idiosyncratic return volatility at the firm level. By allowing for the volatility of the underlying idiosyncratic choice variables to exhibit...

This paper estimates how the shape of the implied volatility smile and the size of the variance risk premium relate to parameters of GARCH-type time-series models measuring how conditional volatility responds to return shocks. Markets in which return shocks lead to large increases in conditional...

Credit claims (or bank loans) represent a large share of the collateral accepted by the Eurosystem in its credit operations in recent years. Hence the techniques and procedures used in the use of credit claims as collateral have become significant elements of the monetary policy implementation...

This paper examines the effects of liquidity during the 2007-09 crisis, focussing on the senior tranche of the CDX.NA.IG Index and on Moody's AAA Corporate Bond Index. The aim is to understand whether these senior credit indices were discounted below fair value and to what extent this discount...

We propose a novel index of short-term endogeneity (or reflexivity) derived by calibrating the Hawkes self-excited conditional Poisson model on empirical time series of trades. The Hawkes model accounts simultaneously for the co-existence and interplay between the exogenous impact of news and...

Skewness is specifically considered to develop semi-parametric upper bounds for option prices and expected payoffs for call options. Bounds on variance default swaps, a new asset, and for the variance risk premium are derived.The Technical Proof for this paper is available at the following URL:...

U.S. exchange-traded stock options are exercisable before expiration. While put options should frequently be exercised early to earn interest, they are not. In this paper, we explain an early exercise decision rule and then examine actual exercise behavior during the period January 1996 through...

This paper studies the predictability of S&P500 returns using short term risk premia as a conditioning variable. We construct dividend prices using futures data and identify short term risk premia by projecting excess returns of dividend claims on their lagged prices. Regression results for...

This paper focuses on the effects of political uncertainty and the political process on implied stock market volatility during U.S. presidential election cycles. Using monthly Iowa Electronic Markets data over five elections, we document that stock market uncertainty, as measured by the VIX...

The relationship between order imbalance, market returns and macroeconomic news is examined in the context of the Australian interest rate futures market. Contemporaneous order imbalance exerts a significant impact on market returns in the expected direction i.e. excess buy (sell) orders drive...