Pricing and hedging structured credit products poses major challenges to financial institutions. This has become very clear during the recent credit crisis. This paper puts several valuation approaches through a crucial test: How did these models perform in one of the worst periods of economic...

This paper studies the relationship between the cross section of stock returns and firm specific jump risk. Using option data, we estimate various option-based time-series. Sorting firms according to their firm specific jump risk, we find that this risk is priced for small stocks. Furthermore,...