We propose new systematic tail risk measures constructed using two different approaches. The first extends the canonical downside beta and co-moment measures, while the second is based on the sensitivity of stock returns to innovations in market crash risk. Both tail risk measures are associated...

This paper evaluates the robustness of UK bond term premia from affine term structure models. We show that this approach is able to match standard specification tests. In addition, term premia display countercyclical behaviour and are positively related to uncertainty about future inflation,...

The prices of derivatives contracts can be used to estimate ‘risk-neutral' probability density functions that give an indication of the weight investors place on different future prices of their underlying assets, were they risk-neutral. In the likely case that investors are risk-averse, this...

This paper shows that the leverage ratio affects repo intermediation for banks and non-bank financial institutions. We exploit a novel regulatory change in the UK to identify an exogenous intensification of the leverage ratio and combine this with supervisory transaction-level data capturing the...

No-arbitrage dynamic term structure models (DTSMs) have regularly been used to estimate interest rate expectations and term premia, but are beset by an identification problem that results in inaccurate estimates. I propose the augmentation of DTSMs with overnight indexed swap (OIS) rates to...

In a world of interconnected financial markets it is plausible that risk appetite — an important factor in asset pricing — is determined globally. By constructing an estimate of variance risk premia (VRP) for UK, US and euro-area equity markets, we are able to estimate international variance...

Dynamic no-arbitrage term structure models are popular tools for decomposing bond yields into expectations of future short-term interest rates and term premia. But there is insufficient information in the time series of observed yields to estimate the unconditional mean of yields in maximally...

Using data on government bond yields in Germany and the United States, we show that overseas unspanned factors — constructed from the components of overseas yields that are uncorrelated with domestic yields — have significant explanatory power for subsequent domestic bond returns. This...

Quantitative easing (QE) has become a key component of the monetary policy toolkit since the global financial crisis. However substantial uncertainty remains about the impact of QE on market liquidity. Identifying the impact is particularly challenging due to the potential for reverse causality,...