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

quantities driven by common factors, which hinders achieving a neat definition of a correlation premium. We formulate a model … returns: an average correlation premium. This premium is both statistically and economically significant, and considerably …-series behavior of the premium for the risk of changes in asset correlations (the premium for correlation risk), including its inverse …

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 …

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 …

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

correlation changes (affecting diversification benefits) is priced. We propose a direct and intuitive test by comparing option ….0% for DJ30) and realized correlations (32.5% and 35.5%, respectively) is direct evidence of a large negative correlation … to the high price of correlation risk. Finally, we provide evidence that option-implied correlations have remarkable …