In this paper we analyze the role of macroeconomic and financial determinants in explaining stock market volatilities in the U.S. market. Both implied and realized volatility are computed model-free and decomposed into positive and negative components, thereby allowing us to compute directional...

This paper introduces forward-looking measures of the network connectedness of fears in the financial system, arising due to the good and bad beliefs of market participants about uncertainty that spreads unequally across a network of banks. We argue that this asymmetric network structure...

This study disentangles a measure of implied skewness that is related to downward movements in the U.S. equity index from the corresponding implied skewness that is associated with upward movements. A positive SKEW index is constructed from S&P500 call options, whereas a negative SKEW index is...

The majority of quasi-analytic pricing methods for American options are efficient near-maturity but are prone to larger errors when time-to-maturity increases. A new methodology, called the "extension"-method, is introduced to increase the accuracy of almost any existing quasi-analytic approach...

Dividend derivatives are not simply a by-product of equity derivatives. They constitute a distinct growing market and an entire suite of dividend derivatives are offered to investors. In this paper we look at two potential models for equity index dividends and discuss their theoretical and...

This paper contains a testing framework for the reliability of systemic risk measurement of banks, using the three leading market-based measures of systemic risk. We test whether the difference within the same category and across dfferent categories of systemic risk of individual banks is...

Credit default risk for an obligor can be hedged away with either a credit default swap (CDS) contract or the alternative constant maturity credit default swap contract (CMCDS). An economic agent should be indifferent to which instrument is used since both cover the same risk with identical...

This article investigates the impact of macroeconomic fundamentals on the valuation of non-negative equity guarantee (NNEG) of equity release mortgages. The house price returns are modelled within the family of multiplicative volatility processes using a two-component GARCH-MIDAS model. The...

In this study, we propose an implied forward-looking measure for systemic risk that employs the information from put option prices, the Systemic Options Value-at-Risk (SOVaR). This new measure can capture the buildup stage of systemic risk in the financial sector earlier than the standard stock...