We explore the effects of fat tails on the equilibrium implications of the long run risks model of asset pricing by introducing innovations with dampened power law to consumption and dividends growth processes. We estimate the structural parameters of the proposed model by maximum likelihood. We...

We propose a fear index for corn using the variance swap rate synthesized from out-of-the-money call and put options as a measure of implied variance. We find negative and time-varying variance risk premiums (realized variance minus implied variance) in the corn market from 1987 to 2009. Our...

We investigate possible presence of time-varying risk premia in forward pound, yen,and Euro monthly exchange rates versus the US dollar 3 over the last two decades. We study this issue using regression techniques and separately using a signal plus noise model. Our models account for time-varying...