This paper investigates the risk and return properties of a trading strategy for the cryptocurrency market. The main predictive power for portfolio formation comes from a simple prospect theory model that only uses price information readily available. The dataset consists of a large body of...

We document that cross-sectional cryptocurrency returns predictably behaviour according to the salience theory of choice under risk. Investors overweight salience outcome (standout from the average of the alternatives). This leads to overpricing (underpricing) the cryptocurrencies with upward...

This paper proposes a solution to the post-crisis Eurozone "missing inflation" puzzle. I demonstrate that following an initially subdued inflation, economic agents started to forecast inflation by extrapolating past inflation developments as opposed to utilizing a purely forward-looking model. I...

We study the problem of hedging early exercise (American) options with respect to exponential utility within a general incomplete market model. This leads us to construct a duality formula involving relative entropy minimization and optimal stopping. We further consider claims with multiple...

Trading in options with a wide range of exercise prices and a single maturity allows a researcher to extract the market's risk neutral probability density (RND) over the underlying price at expiration. The RND contains investors' beliefs about the true probabilities blended with their risk...

A new acceptable price approach to stochastic endpoint determination at given horizon accounting for the marginal investor beliefs and behaviour was proposed. Two-sided filtration with FBSDE defined stochastic dynamics was formulated for acceptable asset price under the risk-neutral probability...

An economic laboratory experiment is used to test the validity of Bessembinder and Lemmon's (2002) seminal risk premium theory. The theory predicts that forward premia in electricity markets are determined by the statistical properties of demand. The existing empirical evidence is mixed,...

VIX futures prices rose slowly in late February and early March 2020 as the COVID-19 pandemic took hold. Futures price premiums, defined as futures prices minus real-time statistical forecasts of future VIX values, turned sharply negative and remained negative until mid-April. Trading strategies...

We are the first to analyze the effect of terror on stock markets by terror ideology. Surprisingly, we find that Islamist terror attacks created significant negative abnormal returns in American and European markets, but the stock market effects of other terror attacks were almost nil. For our...

We investigate financial experts' beliefs about climate risk pricing and analyze how those beliefs influence stock return expectations. In a comprehensive survey, we elicit experts' beliefs using both structured and open-ended questions. We establish that most experts share the view that climate...