We test whether financial fluctuations affect firms' decisions, through their impact on banks' cost of funding. We exploit two shocks to Italian bank CDS spreads and equity valuations: the 2007-2009 financial crisis and the 2010-2012 sovereign debt crisis. Using newly available data linking over...

The asset value of government has traditionally been seen as the accounting value of public assets. We develop a detailed financial economics view on sovereign asset values using market measures to arrive at implied sovereign asset values. We establish definition and dependencies within the...

In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a downward sloping term structure of low-frequency variance...

In this paper, we model financial markets with semi-Markov volatilities and price covarinace and correlation swaps for this markets. Numerical evaluations of varinace, volatility, covarinace and correlations swaps with semi-Markov volatility are presented as well. The novelty of the paper lies...

In this paper, we price covariance and correlation swaps for financial markets with Markov-modulated volatilities. As an example, we consider stochastic volatility driven by two-state continuous Markov chain. In this case, numerical example is presented for VIX and VXN volatility indeces (S&P...