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uva.nl

Rob Sperna Weiland

Essays on macro-financial risks

Summary

One of the central themes in finance is to explain how financial risks affect asset prices and returns. A good understanding of the pricing implications of risks is important for several reasons. First, prices might contain information that could be useful for risk analyses and being able to distill such information could be beneficial for risk management purposes. Second, it helps in understanding why there are cross-sectional differences in average returns across assets: Investors are typically risk averse and therefore not only price in their risk expectations, but also demand compensation for being exposed to unpredictable deviations of underlying risk factors from these expectations. In principle, these so-called risk premia are larger for riskier assets and, hence, cross-sectional differences in risk exposures can explain why some assets tend to earn higher average returns than others.

This dissertation, consisting of three main chapters, analyzes the pricing implications of several 'macro-financial' risks in different contexts. In particular, the first of these chapters investigates the dynamic interplay between credit and liquidity risk in the US corporate bond market. The second chapter considers the modeling and pricing of sovereign credit risk. The third chapter examines the relationship between labor and financial markets and studies the impact of aggregate labor income risk on stock returns.