Normal-Divergence and Risk-Return Tradeoff
With Maryam Farboodi. Time variation in Normal Divergence and the risk premium for uncertainty about the return distribution.
Wisconsin School of Business
Bjørn Eraker
Bill Nygren Chair in Investments and Professor of Finance. I work on asset pricing, derivatives, econometric models of financial markets, and equilibrium models that connect risk, information, and prices.
Working Papers
Current projects focus on information in return distributions, ultra-short maturity options, and rough volatility. Links below point to paper downloads.
Do S&P500 Options Increase Market Volatility? Evidence from 0DTEs
With Greg Adams, Chukwuma Dim, Jean-Sebastien Fontaine, Chayawat Ornthanalai, and Grigory Vilkov.
Estimating Rough Volatility Models
With Grigory Vilkov. Local draft PDF included with this site.
Dynamic Present Values and the Intertemporal CAPM
With Wenyu Wang. A dynamic present-value approach to the ICAPM.
Publications
Selected journal articles, updated to include Predictability Puzzles in the Journal of Financial and Quantitative Analysis.
2025
Predictability Puzzles
Journal of Financial and Quantitative Analysis, 60(1), 482-523.
2022
Market Maker Inventory, Bid-Ask Spreads, and the Computation of Option Implied Risk Measures
With Daniela Osterrieder. Journal of Financial Econometrics.
2022
The Price of Higher Order Catastrophe Insurance: The Case of VIX Options
With Aoxiang Yang. Journal of Finance, 77(6), 3289-3337.
2021
The Volatility Premium
The Quarterly Journal of Finance, 11(3), 1-35.
2017
Explaining the Negative Returns to VIX Futures and ETNs: An Equilibrium Approach
With Yue Wu. Journal of Financial Economics, 125, 72-98.
2016
Durable Goods, Inflation Risk and Equilibrium Asset Prices
With Ivan Shaliastovich and Wenyu Wang. Review of Financial Studies, 29(1), 193-231.
2015
A Non-Linear Dynamic Model of the Variance Risk Premium
With Jiakou Wang. Journal of Econometrics, 187(2), 547-556.
2015
Bayesian Mixed Frequency VARs
With Ching Wai Chiu, Andrew Foerster, Tae Bong Kim, and Hernan Seoane. Journal of Financial Econometrics, 13(3), 698-721.
2015
Do Investors Overpay for Stocks with Lottery-Like Payoffs?
With Mark Ready. Journal of Financial Economics, 115(3), 486-504.
2013
The Performance of Model Based Option Trading Strategies
Review of Derivatives Research, 16(1), 1-24.
2008
An Equilibrium Guide to Designing Affine Pricing Models
With Ivan Shaliastovich. Mathematical Finance, 18(4), 519-543.
2008
Affine General Equilibrium Models
Management Science, 54(12), 2068-2080.
2008
A Bayesian View of Temporary Components in Asset Prices
Journal of Empirical Finance, 15(3), 503-517.
2004
Do Stock Prices and Volatility Jump? Reconciling Evidence from Spot and Option Prices
Journal of Finance, 59, 1367-1403.
2003
The Impact of Jumps in Returns and Volatility
With Michael Johannes and Nicholas G. Polson. Journal of Finance, 58, 1269-1300.
2001
MCMC Analysis of Diffusion Models with Application to Finance
Journal of Business and Economic Statistics, 19(2), 177-191.
2001
Comment on "Numerical Techniques for Maximum Likelihood Estimation of Continuous-Time Diffusion Processes"
Journal of Business and Economic Statistics.
Contact
Wisconsin School of Business, University of Wisconsin-Madison.
Office
5151B Grainger Hall
975 University Avenue
Madison, WI 53706