We develop and estimate a dynamic model of risk-shifting over the business cycle. First, equity holders with Epstein …-Zin preferences increase their taking of idiosyncratic risk substantially more than the standard model in repeated games, because they … "synchronized'' idiosyncratic risk. Third, combined with high market risk premium in the bad states, the clustered risk …

The forward start dual volatility swap is introduced. It can be regarded as the analog for volatility of what the … entropy contract is for variance. Under the risk neutral measure it is shown that the difference between the forward start … volatility swap and its dual is approximately the difference between two specific forward start implied volatilities. A dynamic …