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Culp, Christopher L.; Nozawa, Yoshio; Veronesi, Pietro - National Bureau of Economic Research (NBER) - 2014

Theoretically, corporate debt is economically equivalent to safe debt minus a put option on the firm’s assets. We empirically show that indeed portfolios of long Treasuries and short traded put options (“pseudo bonds”) closely match the properties of traded corporate bonds. Pseudo bonds...

Persistent link: https://www.econbiz.de/10011103514

On the Fundamental Relation Between Equity Returns and Interest Rates

Choi, Jaewon; Richardson, Matthew P.; Whitelaw, Robert F. - National Bureau of Economic Research (NBER) - 2014

This paper uses contingent claim asset pricing and exploits capital structure priority to better understand the relation between corporate security returns and interest rate changes (i.e., duration). We show theoretically and, using a novel dataset, confirm empirically that lower priority...

Persistent link: https://www.econbiz.de/10010821721

Bubbles, Food Prices, and Speculation: Evidence from the CFTC's Daily Large Trader Data Files

Aulerich, Nicole M.; Irwin, Scott H.; Garcia, Philip - National Bureau of Economic Research (NBER) - 2013

The "Masters Hypothesis" is the claim that unprecedented buying pressure from new financial index investors created a massive bubble in agricultural futures prices at various times in recent years. This paper analyzes the market impact of financial index investment in agricultural futures...

Persistent link: https://www.econbiz.de/10010969324

Commodity and Asset Pricing Models: An Integration

Cortazar, Gonzalo; Kovacevic, Ivo; Schwartz, Eduardo S. - National Bureau of Economic Research (NBER) - 2013

We present a simple methodology that integrates commodity and asset pricing models. Given current evidence on the financialization of commodity markets, valuable information about commodity risk premiums can be extracted from asset pricing models and used to substantially improve the estimates...

Persistent link: https://www.econbiz.de/10010950668

Risk, Ambiguity, and the Exercise of Employee Stock Options

Izhakian, Yehuda; Yermack, David - National Bureau of Economic Research (NBER) - 2014

traditional measure of risk, equity volatility. We show that each variable has a statistically significant effect on the timing of … option exercises, with volatility causing executives to hold their options longer in order to preserve remaining option value … for the volatility and ambiguity variables imply similar magnitudes of economic impact upon the exercise decision, with …

Persistent link: https://www.econbiz.de/10010950897

Embedded Leverage

Frazzini, Andrea; Pedersen, Lasse Heje - National Bureau of Economic Research (NBER) - 2012

Many financial instruments are designed with embedded leverage such as options and leveraged exchange traded funds (ETFs). Embedded leverage alleviates investors' leverage constraints and, therefore, we hypothesize that embedded leverage lowers required returns. Consistent with this hypothesis,...

Persistent link: https://www.econbiz.de/10010951107

The Joint Cross Section of Stocks and Options

Ang, Andrew; An, Byeong-Je; Bali, Turan G.; Cakici, Nusret - National Bureau of Economic Research (NBER) - 2013

volatility over the next month, but with decreasing realized volatility. These predictability patterns are consistent with …

Persistent link: https://www.econbiz.de/10010951430

Option Prices in a Model with Stochastic Disaster Risk

Wachter, Jessica A.; Seo, Sang Byung - National Bureau of Economic Research (NBER) - 2013

extension can match both the time series of implied volatilities, as well as the average implied volatility curve. …

Persistent link: https://www.econbiz.de/10011144245

Asset Return Dynamics under Bad Environment Good Environment Fundamentals

Bekaert, Geert; Engstrom, Eric - National Bureau of Economic Research (NBER) - 2009

-varying volatility, skewness and kurtosis in fundamentals while still permitting closed-form solutions for asset prices. The model not …

Persistent link: https://www.econbiz.de/10005037685

Systemic Risk and the Refinancing Ratchet Effect

Lo, Andrew W.; merton, robert c.; Khandani, Amir E. - National Bureau of Economic Research (NBER) - 2009

The confluence of three trends in the U.S. residential housing market---rising home prices, declining interest rates, and near-frictionless refinancing opportunities---led to vastly increased systemic risk in the financial system. Individually, each of these trends is benign, but when they occur...

Persistent link: https://www.econbiz.de/10005089229