We propose a model-free method for measuring the jump skewness risk premium via a tradingstrategy. We find that in the S&P 500 option market, the premium is positive and greater inabsolute terms than the variance premium. The trading strategy allows for examining the premiumin different holding...

We measure the skew risk premium in the equity index market through the skew swap. We argue that just as variance swaps can be used to explore the relationship between the implied variance in option prices and realized variance, so too can skew swaps be used to explore the relationship between...

We study the properties of foreign exchange risk premiums that can explain the forward bias puzzle, defined as the tendency of high-interest rate currencies to appreciate rather than depreciate. These risk premiums arise endogenously from the no-arbitrage condition relating the term structure of...

This paper introduces a model-free decomposition of S&P 500 forward market index returns in terms of realized and implied dispersion, downside, and tail risk using option portfolios. The decomposition lends itself by construction to learn about the different sources of risk in the market return,...

Realized divergence gauges the distinct realized moments associated with time-varying uncertainty and is tradeable with divergence swaps engineered from delta-hedged option portfolios. Consistently with established notions of symmetry in arbitrage-free option markets, implied divergence...

This paper shows that low risk anomalies in the CAPM and in traditional factor models arise when investors require compensation for coskewness risk. Empirically, we find that option-implied ex-ante skewness is strongly related to ex-post residual coskewness, which allows us to construct...

This paper studies whether the evident statistical predictability of bond risk premia translates into economic gains for investors. We propose a novel estimation strategy for a ne term structure models that jointly fits yields and bond excess returns, thereby capturing predictive information...

This paper develops an optimal trading strategy explicitly linked to an agent's preferences and assessment of the distribution of asset returns. The price of this strategy is a portfolio of implied moments, and its expected excess returns naturally accommodate compensation for higher-order...