G13 - Contingent Pricing; Futures Pricing

• Measures of Aggregate Credit Conditions and Their Potential Use by Central Banks

  Staff Discussion Paper 2009-12 Alejandro García, Andrei Prokopiw

  Understanding the nature of credit risk has important implications for financial stability. Since authorities – notably, central banks – focus on risks that have systemic implications, it is crucial to develop ways to measure these risks.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Credit and credit aggregates, Financial markets, Financial stability JEL Code(s): G, G1, G10, G12, G13

• The Equity Premium and the Volatility Spread: The Role of Risk-Neutral Skewness

  Staff Working Paper 2009-20 Bruno Feunou, Jean-Sébastien Fontaine, Roméo Tedongap

  We introduce the Homoscedastic Gamma [HG] model where the distribution of returns is characterized by its mean, variance and an independent skewness parameter under both measures. The model predicts that the spread between historical and risk-neutral volatilities is a function of the risk premium and of skewness.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets JEL Code(s): G, G1, G12, G13