Implicit Subsidy

Implicit subsidies are premia paid by large financial markets participants for reasons other than risk-return optimization (view post here). Their estimation requires skill and...

Implicit subsidies in financial markets are premia paid through transactions that have motives other than conventional risk-return optimization. They manifest as expected returns over...

Salience theory suggests that decision makers exaggerate the probability of extreme events if they are aware of their possibility. This gives rise to subjective...

Across assets, carry is defined as return for unchanged prices and is calculated based on the difference between spot and futures prices (view post...

The correlation of equity and high grade sovereign bond returns is a powerful driver of portfolio construction and the term premia of interest rates....

The volatility risk premium compensates investors for taking volatility risk. Conceptually it is based on the difference between options-implied and expected realized volatility. In...

Variance term premia are surcharges on traded volatility that compensate for bearing volatility risk in respect to underlying asset prices over different forward horizons....

Financial markets produce more than one risk-free interest rate. This is because there are several separate market segments where structured trades replicate such a...

Forward earnings yields and equity carry are plausible indicators of risk premia embedded in equity index futures prices. Data for a panel of 25...

Variance swaps are over-the-counter derivatives that exchange payments related to future realized price variance against fixed rates. Variance swaps help estimating term structures for...