Using data from January 18, 1996 to March 31, 2011, we construct and evaluate returns on a buy-write strategy on the Russell 2000 index. The results demonstrate that the strategy has consistently outperformed the Russell 2000 index on a risk adjusted basis, when implemented with one month to...

Since the early 2000s liquidity in option markets has become less resilient, and our evidence suggests that it is so because of an increased vulnerability to liquidity shocks in the underlying. To demonstrate the causal impact, we consider an incident in which a large broker dealer erroneously...

Using a comprehensive and unique data set from Moody's, we examine correlations between default risk for over 7,000 U.S. public firms. This is the first paper to empirically document the correlation structure both in the time-series and in the cross-section across almost all U.S. non-financial...

We develop, and apply to data on U.S. corporations from 1979-2004, tests of the standard doubly-stochastic assumption under which firms'default times are correlated only as implied by the correlation of factors determining their default intensities. This assumption is violated in the presence of...

Using data from January 18, 1996 to November 16, 2006, we construct and evaluate returns on a buy-write strategy on the Russell 2000 index. The results demonstrate that the strategy has consistently outperformed the Russell 2000 index on a risk adjusted basis, when implemented with one month to...

We develop, and apply to data on U.S. corporations from 1979-2004, tests of the standard doubly-stochastic assumption under which firms' default times are correlated only as implied by the correlation of factors determining their default intensities. This assumption is violated in the presence...

In contrast to existing literature that relates positive issuer bias in ratings to a conflict of interest, we document a bias in corporate ratings resulting from a conservative rating policy that accounts for the asymmetric impact of a rating downgrade on firms' access to capital. Specifically,...

An unusual combination of assumptions - markets have frictions, but nonetheless are price efficient - is required to justify the generic buy-write strategy. In theory, a buy-write strategy allows investors to earn the variance risk premium (VRP) when they cannot access the variance swap market...

We document that short-horizon pricing discrepancies across firms' equity and credit markets are common and that an economically significant proportion of these are anomalous, indicating a lack of integration between the two markets. Proposing a statistical measure of market integration, we...

We develop, and apply to data on U.S. corporations from 1979-2004, tests of the standard doubly-stochastic assumption under which firms'default times are correlated only as implied by the correlation of factors determining their default intensities. This assumption is violated in the presence of...