We propose a novel systemic risk measurement model based on stochastic processes, correlation networks and conditional … systematic factor. Through correlation networks we derive conditional default probabilities, thus obtaining the CoRisk, which …

The objective of the paper is to survey the literature on capital structure theory, both traditional and modern …

Implied correlation and variance risk premium stand out in predicting market returns. However, while the predictive … ability of implied correlation lasts for up to a year, the variance risk premium predicts market returns only for one quarter … ahead. Contrary to the accepted view, implied correlation predicts the market return not through a diversification risk …

law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory … equity than for assets, and stronger for more levered firms — consistent with the theory. We test also the timeseries … implications of the theory. Time variation in asset ivol causes time variation in the option value of equity that translates into …

Ex ante (expected) average equity market correlation is linked to the differential correlation dynamics of growth and … existence of a homogeneous correlation among stocks with similar growth characteristics, depending on the prevailing … link to growth options and the value premium, implied correlation serves as a leading procyclical state variable. Value …

This paper breaks the correlation risk premium down into two components: a premium related to the correlation of …