large amount of aggregate tail risk is missing from the price of financial sector crash insurance during the financial …

generalized version of the uncovered interest rate parity and expectations hypothesis in favor of models with varying risk premia …

We investigate the predictive information content in foreign exchange volatility risk premia for exchange rate returns …. The volatility risk premium is the difference between realized volatility and a model-free measure of expected volatility … than those from carry trade and momentum strategies. Canonical risk factors cannot price the returns from this strategy …

by standard risk factors, and unlikely to be solely due to illiquidity. Our option-based approach also offers a novel …, model-free benchmark for credit risk analysis, which we use to run empirical experiments on credit spread biases, the impact … of asset uncertainty, and bank-related rollover risk. …

futures contracts. Their hedging demand is met by financial intermediaries who act as speculators, but are constrained in risk …-taking. Increases (decreases) in producers’ hedging demand (the risk-bearing capacity of speculators) increase the costs of hedging … 1980-2006, we show that producers’ hedging demand - proxied by their default risk - forecasts spot prices, futures prices …

the Black-Scholes model. Moreover, simple stochastic volatility models with no risk premia generate put returns across all …, and we find that these returns are not inconsistent with explanations such as jump risk premia, Peso problems, and … estimation risk. …

contained in the volatility risk premium and option-implied skewness increases substantially Sharpe ratios and certainty …