We estimate a continuous-time model with stochastic volatility and dynamic crash probability for the S&P 500 index and find that market illiquidity dominates other factors in explaining the stock market crash risk. While the crash probability is time-varying, its dynamic depends only weakly on...

We show that accounting information releases generate large and immediate price impacts, i.e. jumps, in credit default swap (CDS) spreads. Our approach is multivariate, which allows for identification of information events under the presence of confounding news, such as credit events and other...

The role of market jump risk premium implicit in individual equity options has not been examined to date. This paper develops a new factor model for equity returns and option pricing that takes into account the market's diffusive and jump risks. We estimate the model on a large cross section of...

We show that firms gain visibility and shareholder base through disclosing supply-chain relationships with large and well-known trading partners in their SEC filings. Using a novel research design that focuses on the investor recognition effect of disclosures, we find a significant improvement...

We survey the theory and empirical evidence on GARCH option valuation models. We provide an overview of different functional forms for the volatility dynamic, multifactor models, nonnormal innovation distributions and valuation techniques. We also discuss alternative pricing kernels used for...

Financial contagion occurs when return and volatility transmit between fundamentally unrelated sectors. Our equilibrium model shows that contagion arises because investors pay fluctuating attention to news. As a negative shock hits one sector, investors pay more attention to it. This raises the...

There are significant differences among sell-side analysts in how frequently they revise recommendations. We introduce a method for classifying analysts based on their recommendation speed-style and show that much of this variation is an analyst-individual trait. Analysts who change their...

We find that a firm's stock price reaction to its credit rating downgrade announcement is muted by 44--52% when credit default swaps (CDSs) trade on its debt. We explore the role of the CDS markets in providing information ex ante and relieving financing frictions ex post for downgraded firms....

We analyze the determinants and consequences of option listing on IPO firm stock. We find that options are listed earlier on venture-backed and lower-reputation underwriter IPOs. We find a significant decrease in stock returns immediately after option listing, persisting for a year. Analyzing...

Using index options and returns from 1996 to 2009, we estimate discrete-time models where asset returns follow a Brownian increment and a Leacute;vy jump. Time variations in these models are generated with an affine GARCH, which greatly facilitates the empirical implementation. We find that the...