This paper examines cross-sectional relations between ex ante expected returns and betas. As a proxy for ex ante expected returns, we use implied returns obtained from the risk-adjusted option pricing model suggested in this paper. We find that implied returns have a positive and significant...

Prior research uses the basic one-period European call-option pricing model to compute default measures for individual firms and concludes that both the size and book-to-market effects are related to default risk. For example, small firms earn higher return than big firms only if they have...

In this paper, we use a structural credit risk model developed by Geske (1977) and generalized by Chen et al. (2014) to assess the delinquency risk of U.S. Treasury debt implied by U.S. sovereign CDS spreads. We also use the fitted structural model to determine the implied debt ceiling for the...