Asset Variance Risk Premium and Capital Structure
“I find that the premium reduces leverage by increasing risk-neutral bankruptcy probability and costs in a model where asset returns have stochastic variance with the risk premium.”
StrategyVolatility risk premium
InputsOptions-implied
Missing from abstract: benchmark, out-of-sample test, costs, multiple testing, universe
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The paper's neighbourhoodVolatility risk premium by year
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|---|---|---|---|---|---|
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