The finance literature looks at a number of factors to explain risk premia in corporate debt, such as liquidity effects, jump-to-default risk, and contagion risk. Stochastic re-covery rates as a source of systematic risk have not received much attention so far, most likely due to the...

We analyze the term structure of illiquidity premiums as the difference between the yield curves of two major bond segments that are both government guaranteed but differ in their liquidity. We show that its characteristics strongly depend on the economic situation. In crisis times, illiquidity...

This study shows that fitting errors of equity-option-implied volatility surfaces are informative about intermediary frictions. For each stock and day, we quantify the goodness of fit between the observed implied volatilities of all available options and the corresponding estimates from...