Hedge funds are fundamentally exposed to equity volatility, skewness, and kurtosis risks based on the systematic pattern and significant spread in alphas from the existing models that do not control for the higher-moment risks. The spread and pattern in alphas do not disappear with bootstrap...

In this paper, we revisit the question whether the Fama-French factors are manifestations of distress risk premiums. To this end, we develop new tests specifically aimed at dissecting the Fama-French factor returns from a distress risk premium. While we find that small-cap and value exposures...

Previous published studies document price differences between principal and coupon strips although both securities promise identical cash flows at maturity. This paper gauges the economic significance of this apparent anomaly and investigates if holders of the higher-priced strips can exploit...

We propose a proxy for a climate risk factor, the pollutive-minus-clean (PMC) portfolio, which captures differences in returns to firms that have high versus low corporate emissions. By regressing individual stock returns on the PMC factor, we obtain estimates of asset-level climate risk...

This article presents a framework for modeling defaultable debt under alternative recovery conventions (for a wide class of processes describing recovery rates and default probability). These debt models have the ability to differentiate the impact of recovery rates and default probability, and...

From a credit risk perspective, little is known about the distress factors -- economy-wide or firm-specific -- that are important in explaining variations in defaultable coupon yields. This paper proposes and empirically tests a family of credit risk models. Empirically, we find that...

We show that a model featuring an average commodity factor, a carry factor, and a momentum factor is capable of describing the cross-sectional variation of commodity returns. More parsimonious one- and two-factor models that feature only the average and/or carry factors are rejected. To provide...