This study characterises the exchange rate risk premium in context of a small open economy with controlled floating regime. The empirical analysis applies time-varying coefficients Bayesian structural vector autoregressive (TVC-BSVAR) model on data from Vietnamese over sample period February 2012 to 2019. evidence shows that varies time, and increases inflation foreign direct investment capital...

Abstract The skill premium has increased significantly in the United States last five decades. During same period, individual wage risk also increased. This paper proposes a mechanism through which rise increases premium. Intuitively, uninsured precautionary savings, thereby boosting capital accumulation, due to capital-skill complementarity. Using quantitative macroeconomic model, we find that...

With 87 years of volatile stock return data, disaster-risk models operate in a narrow band between an ability to lower the equity premium from the historical geometric 5.9% per annum to a more model-appealing 4%, and an equity premium that can no longer be distinguished from zero (risk neutrality) at conventional statistical significance levels. Available below-the-money index option prices lim...

Based on the fundamental equations of equity valuation, we derive here the relationship between the equity risk premium, duration and dividend yield. Aside from providing a logical foundation for the difference between the ex-ante and ex-post measures of the risk premium, the work leads to other outcomes, namely, but not specifically, (1) that the current, effective dividend policy is a signall...

We investigate whether the volatility risk premium is negative by examining the statistical properties of delta-hedged option portfolios (buy the option and hedge with stock). Within a stochastic volatility framework, we demonstrate a correspondence between the sign and magnitude of the volatility risk premium and the mean delta-hedged portfolio returns. Using a sample of S&P 500 index options,...

Theoretical models of guaranteed renewable insurance display front-loaded premium schedules. Such schedules both cover lifetime total claims of low-risk and high-risk individuals and provide an incentive for those who remain low-risk to continue to purchase the policy. Questions have been raised of whether actual individual insurance markets in the US approximate the behavior predicted by these...

Rare Disasters and the Equity Premium in a Two-Country World Laurence Copeland and Yanhui Zhu We extend the Barro (2006) closed-economy model of the equity risk premium in the presence of extreme events ("disasters") to a two-country world. In this more general setting, both the output risk of rare disasters and the associated risk of a default on Government debt, can be diversi…ed. The extent ...