4 posts on "Term Structure"
February 24, 2026
Estimating the Term Structure of Corporate Bond Risk Premia
Understanding how short- and long-term assets are priced is one of the fundamental questions in finance. The term structure of risk premia allows us to perform net present value calculations, test asset pricing models, and potentially explain the sources of many cross-sectional asset pricing anomalies. In this post, I construct a forward-looking estimate of the term structure of risk premia in the corporate bond market following Jankauskas (2024). The U.S. corporate bond market is an ideal laboratory for studying the relationship between risk premia and maturity because of its large size (standing at roughly $16 trillion as of the end of 2024) and because the maturities are well defined (in contrast to equities).
February 3, 2021
Equity Volatility Term Premia
Investors can buy volatility hedges on the stock market using variance swaps or VIX futures. One motivation for hedging volatility is its negative relationship with the stock market. When volatility increases, stock returns tend to decline contemporaneously, a result known as the leverage effect. In this post, we measure the cost of volatility hedging by decomposing the prices of variance swaps and VIX futures into volatility forecasts and estimates of expected returns (“equity volatility term premia”) from January 1996 to June 2020.
Posted at 7:00 am in Financial Markets | Permalink
February 1, 2021
The Law of One Price in Equity Volatility Markets
Can option traders take a square root? Surprisingly, maybe not. This post shows that VIX futures prices exhibit significant deviations from their option-implied upper bounds—the square root of variance swap forward rates—thus violating the law of one price, a fundamental concept in economics and finance. The deviations widen during periods of market stress and predict the returns of VIX futures. Just as the stock market struggles with multiplication, the equity volatility market appears unable to take a square root at times.
Posted at 7:00 am in Financial Markets | Permalink
May 8, 2013
Are Stocks Cheap? A Review of the Evidence
We surveyed banks, we combed the academic literature, we asked economists at central banks.
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