We study the disagreement of foreign exchange (FX) dealers using proprietary survey data on dealers' price quotes of short- and long-tenor currency derivatives. Dispersion among dealers is the highest at short tenors, where heterogeneous information is of great relevance, and is much lower at...

Asset heterogeneity is widely believed to hurt the liquidity in markets of many important fixed-income assets such as corporate and municipal bonds. We develop a model in which heterogeneous assets are traded with search friction to study the impact of a quasi-consolidated (QC) trading design in...

Asymmetric shocks are common in markets; securities'; payoffs are not normally distributed and exhibit skewness. This paper studies the portfolio holdings of heterogeneous agents with preferences over mean, variance and skewness, and derives equilibrium prices. A three funds separation theorem...

The early work of Tobin (1958) showed that portfolio allocation decisions can be reduced to a two stage process: first decide the relative allocation of assets across the risky assets, and second decide how to divide total wealth between the risky assets and the safe asset. This so called...

This paper investigates whether multivariate crash risk is priced in the cross- section of expected stock returns. Motivated by a theoretical asset pricing model, we capture the multivariate crash risk of a stock by a combined measure based on its expected shortfall and its multivariate lower...

We derive lower and upper bounds on the conditional expected excess market return that are related to risk-neutral volatility, skewness, and kurtosis indexes. The bounds can be calculated in real time using a cross section of option prices. The bounds require a no-arbitrage assumption, but do...