A recent literature has documented large real effects of trade policy uncertainty (TPU) on trade, employment, and investment, but there is little evidence that investors are compensated for bearing such risk. To quantify the risk premium associated with TPU, we exploit quasi-experimental variation in exposure to TPU arising from Congressional votes revoke China’s preferential tariff treatment b...

I nvestors and market analysts generally believe that the yield on a nominal bond includes an inflation risk premium to compensate investors for bearing the inflation risk associated with the bond. Knowing how much of a risk premium investors require on nominal bonds can be valuable information for policymakers. For government Treasuries, the size of the risk premium represents the potential in...

This paper analyzes the joint influence of the quality of a bank’s loan portfolio, the bank’s maturity gap and its deposit rate policy on the value of deposit insurance in an arbitrage-free Basel II consistent framework. We develop and apply a two-stage structural model of a bank where deposit insurance is a European put option on the loan portfolio, the default of each loan is driven by the bo...

We uncover significant effects of jump risk on conditional equity premium. Realized volatility due to negative or “bad” (positive or “good”) jumps in stock market prices predicts a rising (falling) near-term equity premium. The forecasting power of signed jump risk measures remains statistically significant even when we control for variance risk premium that Drechsler and Yaron (2011) attribute...

We consider the hedging problem in a jump-diffusion market with correlated assets. For this purpose, we employ the locally risk-minimizing approach and obtain the hedging portfolio as a solution of a multidimensional system of linear equations. ‎This system shows that in a continuous market, independence and correlation assumptions of assets lead to the same locally risk-minimizing portfolio. ‎...

portfolio theory assumes that investors accept risk. this means thatin the equal rate of return on the two assets, the assets were chosenthat have a lower risk level. modern portfolio theory is accepted byinvestors who believe that they are not cope with the market. sothey keep many different types of securities in order to access theoptimum efficiency rate that is close to the rate of return o...

Futures on fresh farmed salmon traded at the Fish Pool market in Norway are analyzed context of Capital Asset Pricing Model (CAPM) and a corresponding three-factor model where contracts separated based their maturities. Looking into 1 month; 6 months 12 contracts, we find that all alphas most betas statistically insignificant. We conclude CAPM equilibrium condition holds Salmon futures prices m...

The present paper considers a retiree of a certain age with an initial endowment of investable wealth facing the following alternative investment opportunities. One possibility is to buy a single premium immediate annuity-contract. This insurance contract pays a life-long constant pension payment of a certain amount, depending e.g. on the age of the retiree, the operating cost of the insurance ...

We develop a model of portfolio choice that nests the views of Keynes—who advocates concentration in a few familiar assets—and Markowitz—who advocates diversification across assets. We rely on the concepts of ambiguity and ambiguity aversion to formalize the idea of an investor's "familiarity" toward assets. The model shows that when an investor is equally ambiguous about all assets, then the o...

Capacity of garden productions in Iran is such that is accounted as a country that produces thirteen garden products in the world but despite excellent condition in Iran for producing garden products, natural disasters damage production of fruits in the country therefore farmers incur a loss. Pistachio tree has been in danger of destruction and dryness. Thus, in order to reduce loss incurred on...