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Mixed signals : investment distortions with adverse selection

Darst, R. Matthew; Refayet, Ehraz - 2019

We study how adverse selection distorts equilibrium investment allocations in a Walrasian credit market with two …-sided heterogeneity. Representative investor and partial equilibrium economies are special cases where investment allocations are … trade and investment allocations below perfect information levels. The degree of heterogeneity between informed agents' type …

Persistent link: https://www.econbiz.de/10012181247

Credit-Crunch Dynamics with Uninsured Investment Risk

Goldberg, Jonathan E. - 2013

I study the effects of credit tightening in an economy with uninsured idiosyncratic investment risk. In the model … consumption. Thus my paper highlights how investment risk affects the economy's response to a credit crunch …

Persistent link: https://www.econbiz.de/10013081571

Idiosyncratic Investment Risk and Business Cycles

Goldberg, Jonathan E. - 2014

I show that, due to imperfect risk sharing, aggregate shocks to uncertainty about idiosyncratic return on investment …, with an idiosyncratic uncertainty shock, investment in physical capital can remain low even after the stock market and firm … idiosyncratic investment risk can explain, qualitatively, the aftermath of financial panics -- elevated risk premia, a sharp and …

Persistent link: https://www.econbiz.de/10013059711

Credit Default Swaps in General Equilibrium : Spillovers, Credit Spreads, and Endogenous Default

Darst, Matthew - 2016

, when firms' cash flows are correlated, CDSs impact the cost of capital{credit spreads{and investment for all firms, even …

Persistent link: https://www.econbiz.de/10012992726

Nothing is certain except death and taxes : the lack of policy uncertainty from expiring "temporary" taxes

Chang, Andrew C. - 2018

What is the policy uncertainty surrounding expiring taxes? How uncertain are the approvals of routine extensions of temporary tax policies? To answer these questions, I use event studies to measure cumulative abnormal returns (CARs) for firms that claimed the U.S. research and development (R&D)...

Persistent link: https://www.econbiz.de/10011932265

A Tale of Two Option Markets : Pricing Kernels and Volatility Risk

Song, Zhaogang; Xiu, Dacheng - 2017

Using prices of both S&P 500 options and recently introduced VIX options, we study asset pricing implications of volatility risk. While pointing out the joint pricing kernel is not identified nonparametrically, we propose model-free estimates of marginal pricing kernels of the market return and...

Persistent link: https://www.econbiz.de/10014121051

Credit Default Swap Spreads and Variance Risk Premia

Zhou, Hao - 2011

We find that firm-level variance risk premium, estimated as the difference between option-implied and expected variances, has a prominent explanatory power for credit spreads in the presence of market- and firm-level risk control variables identified in the existing literature. Such a...

Persistent link: https://www.econbiz.de/10013118597

Expectations of Functions of Stochastic Time with Application to Credit Risk Modeling

Costin, Ovidiu - 2013

We develop two novel approaches to solving for the Laplace transform of a time-changed stochastic process. We discard the standard assumption that the background process (X<sub>t</sub>) is Levy. Maintaining the assumption that the business clock (T<sub>t</sub>) and the background process are independent, we develop...

Persistent link: https://www.econbiz.de/10013083784

Volatility of Volatility and Tail Risk Premiums

Park, Yang-Ho - 2013

This paper reports on tail risk premiums in two tail risk hedging strategies: the S&P 500 puts and the VIX calls. As a new measure of tail risk, we suggest using a model-free, risk-neutral measure of the volatility of volatility implied by a cross section of the VIX options, which we call the...

Persistent link: https://www.econbiz.de/10013074319

QE Auctions of Treasury Bonds

Song, Zhaogang - 2014

The Federal Reserve (Fed) uses a unique auction mechanism to purchase U.S. Treasury securities in implementing its quantitative easing (QE) policy. In this paper, we study the outcomes of QE auctions and participating dealers' bidding behaviors from November 2010 to September 2011, during which...

Persistent link: https://www.econbiz.de/10013050098