One important source of systemic risk can arise from asset commonality among financial institutions. This indirect interconnection may occur when financial institutions invest in similar or correlated assets and it is also described as overlapping portfolios. In this paper, we propose a new...

Political uncertainty drives markets. Among macroeconomic forces, it is one of the fewfactors that systematically affect most assets - hence it qualifies as a state variable in the senseof the ICAPM and should carry a risk premium. We employ static and conditional factormodels using data in...

Using the Tick-Size Pilot Program, we show that tick-size increases in treated firms cause a significant reduction in stock price crash risk. Earnings management and algorithmic trading are the two key channels of impact. We also show that sophisticated investors such as short-sellers are...

The COVID-19 pandemic has highlighted the impacts that rare disasters can have on credit markets. We discuss and 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...

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...