We examine the pricing of financial crash insurance during the 2007-2009 financial crisis in U.S. option markets, and we show that a large amount of aggregate tail risk is missing from the cost of financial sector crash insurance during the crisis. The difference in costs between...

We examine the pricing of financial crash insurance during the 2007-2009 financial crisis in U.S. option markets, and we show that a large amount of aggregate tail risk is missing from the cost of financial sector crash insurance during the crisis. The difference in costs between...

We document a form of excess volatility that is difficult to reconcile with standard models of prices, even after accounting for variation in discount rates. We compare prices of claims on the same cash flow stream but with different maturities. Standard models impose precise internal...

We study the pricing of uncertainty shocks using a wide-ranging set of options that reveal premia for macroeconomic risks. Portfolios hedging macro uncertainty have historically earned zero or even significantly positive returns, while those exposed to the realization of large shocks have earned...

Investors in option markets price in a substantial collective government bailout guarantee in the financial sector, which puts a floor on the equity value of the financial sector as a whole, but not on the value of the individual firms. The guarantee makes put options on the financial sector...

We study the pricing of shocks to uncertainty and volatility using a novel and wide-ranging set of options contracts. If uncertainty shocks are viewed as bad by investors, portfolios that hedge them should earn negative premia. Empirically, however, such portfolios have historically earned...