In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks … traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a … downward sloping term structure of low-frequency variance risk premia in normal times. In periods of distress, the term …

quantify the asset-pricing implications of disaster risk on the risk-free rate, credit spreads, and their term structures. The … findings underscore the heterogeneous effects of disasters on the risk-free and risky debt segments of credit markets. The …

tightening. Besides, small banks are found to suffer more as their credit risk and liquidity risk increase. We show that lending … relationships benefit banks in hedging liquidity risk. We also document that central bank liquidity increments are associated with a …

diversification, and how an acknowledgment of volatility clustering can enhance the quality of risk models. The analysis is carried … risk historically received more attention, especially in financial regulation, our analysis shows that volatility clusters …Heavy tails and volatility clusters are both stylized facts of financial returns that destabilize markets. The former …

This paper suggests how to quantify asymmetries in volatility spillovers that emerge due to bad and good volatility … stocks at the disaggregate level. Moreover, the spillovers of bad and good volatility are transmitted at different magnitudes …

Asymmetries in volatility spillovers are highly relevant to risk valuation and portfolio diversification strategies in … volatility may spill over at different magnitudes. This paper fills this gap with two contributions. One, we suggest how to … quantify asymmetries in volatility spillovers due to bad and good volatility. Two, using high frequency data covering most …

One of the significant problems of a modern economy and economics is political risk. A destructive influence of … business activities. Moreover, many hidden political factors change the political risk into immeasurable political uncertainty. …