Following Taleb/Tapiero (2009) , the hypotheses are contrasted based on partial information of firms had losses (including external risk factors); the policy implications of this analysis are projected after evaluating two fundamental issues that continue to preoccupy the public opinion: how...

First externalities risk due to the size of the companies or the principle that large companies are also at risk of bankruptcy (too big to fail) are examined. The problem is illustrated by a case in which extreme risks with negative consequences for savers and investors are taken. If we...

When lenders gain control rights in technical default, they influence corporate operating decisions. We develop a novel measure of operational risk-taking that utilizes industry-specific data on corporate operations. Using a regression discontinuity design, we find that borrowers reduce...

Financial innovation has increased opportunities for diversification and lowered investment costs, but has not reduced the relative cost of active (informed) investment strategies compared with passive (less informed) strategies. What are the consequences? I have studied an economy with linear...

Inspired by Aumann and Serrano (2008) and Foster and Hart (2009), we propose risk-neutral options' implied measures of riskiness and investigate their significance in predicting the cross section of expected returns per unit of risk. The empirical analyses indicate a negative and significant...

The opacity of over-the-counter (OTC) markets – in which a large number of financial products including credit derivatives trade – appears to have played a central role in the ongoing financial crisis. We model such OTC markets for risk-sharing in a general equilibrium setup where agents...

We model the opacity of over-the-counter (OTC) markets in a setup where agents share risks, but have incentives to default and their financial positions are not mutually observable. We show that there is "excess leverage" in that parties take on short OTC positions that lead to levels of default...

Using Ohlson's (1980) measure of bankruptcy risk (O-Score), Dichev (1998, The Journal of Finance 53, 1131−1147) documents a bankruptcy risk anomaly in which firms with high bankruptcy risk earn lower than average returns. This study first demonstrates that the negative association between...

We introduce a new approach to measuring riskiness in the equity market. We propose option implied and physical measures of riskiness and investigate their performance in predicting future market returns. The predictive regressions indicate a positive and significant relation between...

We propose options' implied and physical measures of riskiness and investigate their performance in predicting future returns on the U.S. equity market. The predictive regressions indicate a positive and significant relation between time-varying riskiness and expected market returns. The...