As observed in the financial crisis, CDS spreads tend to increase simutaneously as a reaction to common shocks. Focusing on the spillover effects triggered by extreme events, we propose a credit risk analysis tool by applying credit default swap spread returns to the concept of 4CoVaR suggested...

In this paper, I examine how financialization affects the term structure of risk premia by using an equilibrium model for commodity futures markets. I define financialization as the entry of cross-asset investors, who are exposed to a commodity risk, into a commodity market. Qualitatively, the...

Sellers of variance swaps earn time-varying risk premia for their exposure to realized variance, the level of variance swap rates, and the slope of the variance swap curve. To measure risk premia, we estimate a dynamic term structure model that decomposes variance swap rates into expected...

This paper analyzes a term structure model that allows for both stochastic correlation between underlying factors and an extended market price of risk specification. We show that significant improvement in bond fitting and portfolio performance is obtained by the model. However, the restriction...

This paper investigates the price formation of credit risk premia across European sovereign countries. A metric of such premia is retrieved under the statistical measure using bootstrap techniques on hedging portfolios. This latter is retrieved in the cash-synthetic market by means of comparison...

The central ingredient of empirical asset pricing tests is the (expected) risk premium. However, heterogeneity in expectations makes aggregation of beliefs a non-trivial task. This paper proposes a novel approach to estimate subjective bond risk premia based on the historical accuracy of...

This paper estimates the term-structure of volatility risk premia for the stock market. Realized variance term premia are increasing in systematic risk and predict variance swap returns. Implied volatility term premia are decreasing in risk initially, but then increase at a lag, predicting VIX...

We explore the term structures of claims to a variety of cash flows: U.S. government bonds (claims to dollars), foreign government bonds (claims to foreign currency), inflation-adjusted bonds (claims to the price index), and equity (claims to future equity indexes or dividends). Average term...

The term structure of interest rates does not adhere to the expectations hypothesis, possibly due to a risk premium. We consider the implications of a risk premium that arises from endogenous market segmentation driven by variable inflation rates. In the absence of autocorrelation in inflation,...

We find that interest rate variance risk premium (IRVRP) - the difference between implied and realized variances of interest rates - is a strong predictor of U.S. Treasury bond returns of maturities ranging between one and ten years for return horizons up to six months. IRVRP is not subsumed by...