Similar Search Results

The Pricing of Correlated Default Risk : Evidence from the Credit Derivatives Market

Tarashev, Nikola A. - 2019

correlation risk premium. This premium, which covaries negatively with current realized correlations and positively with future … realized correlations, sheds light on market perceptions of and attitude towards correlation risk.Das Portfoliokreditrisiko …

Persistent link: https://www.econbiz.de/10012903245

Option-implied information and predictability of extreme returns

Vilkovz, Grigory; Xiaox, Yan - 2013 - This version: January 28, 2013

We study whether prices of traded options contain information about future extreme market events. Our option-implied conditional expectation of market loss due to tail events, or tail loss measure, predicts future market returns, magnitude, and probability of the market crashes, beyond and above...

Persistent link: https://www.econbiz.de/10010226098

Cross-section without factors : correlation risk, strings and asset prices

Distaso, Walter; Mele, Antonio; Vilkov, Grigory - 2021 - This version: January 13, 2021

quantities driven by common factors, which hinders achieving a neat definition of a correlation premium. We formulate a model … returns: an average correlation premium. This premium is both statistically and economically significant, and considerably …-series behavior of the premium for the risk of changes in asset correlations (the premium for correlation risk), including its inverse …

Persistent link: https://www.econbiz.de/10012421289

Option-Implied Dependence and Correlation Risk Premium

Bondarenko, Oleg - 2020

market moves down or up. The risk premium for the down correlation is strongly negative, while the opposite is true for the … up correlation. These findings are consistent with the economic intuition that investors dislike the loss of … diversification when markets fall, but they actually prefer high correlation when markets rally …

Persistent link: https://www.econbiz.de/10012832219

Unconditional Asset Pricing When Betas Covary with the Riskless Rate

Saxena, Konark - 2017

I show that the covariance of betas with riskless rates, referred to as “kappa,” is an important determinant of average returns. Absence of arbitrage implies that average excess returns equal kappa plus the product of expected beta and the average riskless rate. Implementing this relation...

Persistent link: https://www.econbiz.de/10012970930

The correlation puzzle : the interaction of bond and risk correlation

Bethke, Sebastian; Kempf, Alexander; Gehde-Trapp, Monika - 2013 - This version: August 7, 2013

Diversification benefits depend on the correlation between assets. Unfortunately, asset correlation increases when it … is most needed. We examine bond correlation using a broad sample of US corporate bonds. We find bond correlation to be … higher during the financial crisis in 2008. Increased bond correlation results from higher correlation between corporate bond …

Persistent link: https://www.econbiz.de/10009777926

The term structure of systematic and idiosyncratic risk

Hollstein, Fabian; Prokopczuk, Marcel; Wese Simen, Chardin - 2017

We study the term structure of variance (total risk), systematic and idiosyncratic risk. Consistent with the expectations hypothesis, we find that, for the entire market, the slope of the term structure of variance is mainly informative about the path of future variance. Thus, there is little...

Persistent link: https://www.econbiz.de/10011751173

Coskewness Risk Decomposition, Covariation Risk, and Intertemporal Asset Pricing

Kalev, Petko S. - 2019

We develop an intertemporal asset pricing model where cash flow news, discount rate news, and their second moments are priced by the market. This model generalizes the market return decomposition framework, showing that intertemporal considerations imply a decomposition of squared market returns...

Persistent link: https://www.econbiz.de/10012901111

The Pricing of Long and Short Run Variance and Correlation Risk in Stock Returns

Cosemans, Mathijs - 2017

This paper studies the pricing of long and short run variance and correlation risk. The predictive power of the market … variance risk premium for returns is driven by the correlation risk premium and the systematic part of individual variance … volatility and correlation are priced. Both long and short run volatility and correlation factors have explanatory power for …

Persistent link: https://www.econbiz.de/10012976032

Switching Risk Off : FX Correlations and Risk Premia

Beber, Alessandro - 2014

using the switch to a polarized correlation regime of foreign-exchange returns. These risk-off transitions are relatively … changes in macroeconomic fundamentals and to volatility or average correlation shocks. Risk-off switches have very significant …

Persistent link: https://www.econbiz.de/10013045820