We infer a term structure of interbank risk from spreads between rates on interest rate swaps indexed to the London Interbank Offered Rate (LIBOR) and overnight indexed swaps. We develop a tractable model of interbank risk to decompose the term structure into default and non-default (liquidity)...

We use the term structure of spreads between rates on interest rate swaps indexed to LIBOR and overnight indexed swaps to infer a term structure of interbank risk. We develop a dynamic term structure model with default risk in the interbank market that, in conjunction with information from the...

I present a tractable framework, first developed in Trolle and Schwartz (2009), for pricing energy derivatives in the presence of unspanned stochastic volatility. Among the model features are i) a perfect fit to the initial futures term structure, ii) a fast and accurate Fourier-based pricing...

We empirically investigate the importance of parameter uncertainty to bond investors. Using a Bayesian approach, we quantify the expected utility loss due to parameter uncertainty from following seemingly optimal dynamic portfolio strategies. Expected utility losses are increasing in the number...

We show that liquidity risk is priced in the cross section of returns on credit default swaps (CDSs). We measure CDS market illiquidity by aggregating deviations of credit index levels from their no-arbitrage values implied by the index constituents' CDS spreads, and we construct a tradable...