In this paper, we introduce a new US uncertainty index which is more sensitive to consumer spending and therefore reflects households’ decisions. We find evidence that macroeconomic uncertainty shocks impose negative, statistically significant, and long-lasting effects on consumption, income...

We develop a novel stochastic valuation and premium calculation principle based on probability measure distortions that are induced by quantile processes in continuous time. Necessary and sufficient conditions are derived under which the quantile processes satisfy first– and second– order...

Commodity price volatility has long been recognized as a main risk for commodity producers' welfare and has led to diversification efforts. Less noticed has been the importance of commodity correlations, and their increase after 2006, in the risk faced by producers. To assess their impact, we...

We propose a new measure of time-varying tail risk that is directly estimable from the cross section of returns. We exploit firm-level price crashes every month to identify common fluctuations in tail risk across stocks. Our tail measure is significantly correlated with tail risk measures...

We describe a simple model and a baseline backtest on it that together are not unrepresentative of set-ups currently in place in many financial institutions for use in model design and validation. We describe how to measure the performance of the backtest and then look at ways to improve it