In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks … traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a … downward sloping term structure of low-frequency variance risk premia in normal times. In periods of distress, the term …

This paper uses the method developed by Bollerslev and Todorov (2011b) to estimate risk premia for extreme events for … method to German data yields very similar results to the ones shown for the US data. The risk premia for rare events … constitute a considerable part of the total equity and variance risk premia for both markets. When using the results to build an …

We examine the pricing of volatility risk in the cross-section of equity Real Estate Investment Trust (REIT) stock …) volatility. In contrast to the negative and significant price of systematic volatility risk for Non-REIT equities, we find that …. Within the total volatility risk profile, idiosyncratic volatility dominates aggregate volatility in REIT pricing …

almost half of the implied volatility skew can be explained by the skew risk premium. We provide evidence that skew and …We measure the skew risk premium in the equity index market through the skew swap. We argue that just as variance swaps … skew swaps be used to explore the relationship between the skew in implied volatility and realized skew. Like the variance …

One of the main explanations for the idiosyncratic volatility (IVOL) puzzle (i.e., the negative relation between lagged … IVOL and returns) is a missing risk factor. We show analytically that if IVOL proxies for a missing risk factor, then the … risk factors. Overall, our results suggest that both diversifiable (i.e., true idiosyncratic risk) and non …

evidence indicates that stocks with higher idiosyncratic volatility have the lower exposition on the indegree risk factor. …The paper investigates the determinants of the idiosyncratic volatility puzzle by allowing linkages across asset … based on Granger causality test have lower expected returns, not related to idiosyncratic volatility. Secondly, empirical …

This paper examines the relationship between idiosyncratic risk and stock returns in BRICS (Brazil, Russia, India … risk puzzle by dividing firms into groups based on fundamentals, such as their market risk, financial constraints, and … liquidity position. Finally, it investigates whether the idiosyncratic risk is priced in BRICS countries’ equity markets. The …

Corporate bond returns in the major developed economies increase with risk, as measured by maturity and ratings. From a …

-arbitrage theory predicts, (2) both bond return volatility and the price of that risk vary stochastically, and (3) there is an …, volatility dynamics play a fundamental role in the dynamics of risk premia, and bond factor Sharpe ratios vary stochastically. In … the US, VIX is a significant predictor of bond factor volatility and price of risk, incremental to yield-curve level …