This paper presents a parsimonious, implementable model for the estimation of the short-and long-term expected rates of return on the S&P 500 stock market Index. Sufficient statistics for the expected return on the S&P 500 Index consist of the risk-free rate of interest, the option market's...

The capital markets in general, and the equity markets in particular, exhibit a well-known phenomenon: During times of distress, intra-market correlations tighten, as traded assets exhibit a greater sensitivity to the "systematic factor." This paper extends that analysis to the corporate bond...