The paper introduces a Black\amp;Cox-type structural model for credit default swaps. The existing literature on structural CDS pricing is extended by allowing a general functional form for the default barrier specified without reference to asset volatilities, dividend yields and interest rates....

This paper develops an optimal trading strategy explicitly linked to an agent's preferences and assessment of the distribution of asset returns. The price of this strategy is a portfolio of implied moments, and its expected excess returns naturally accommodate compensation for higher-order...

We introduce a new class of swap trading strategies in incomplete markets, which disaggregate the tradeable compensation for time-varying nonlinear risks in aggregate market returns. While the price of Hellinger variance, a tradeable put-call symmetric measure of variance, has a leading...

We develop Residual MisPricing (RMP), an index capturing mispricing relative to a linear benchmark asset pricing model, from the structure imposed by no-arbitrage. RMP is fully conditional and depends only on the returns of basic assets. Return data for several economies reveal that RMP is...

We propose a model-free method for measuring the jump skewness risk premium via a tradingstrategy. We find that in the S&P 500 option market, the premium is positive and greater inabsolute terms than the variance premium. The trading strategy allows for examining the premiumin different holding...

We show how distributions can be reduced to low-dimensional scenario trees. Applied to intertemporal distributions, the scenarios and their probabilities become time-varying factors. From S&P 500 options, two or three time-varying scenarios suffice to forecast returns, implied variance or...