Assistant professorDepartment of Finance and Center for Financial Frictions (FRIC)
Solbjerg Plads 3, A5
Currently visiting the
London, WC2A 2AE
Email: gv.fi[at]cbs.dk and g.venter[at]lse.ac.uk
Mortgage Risk and the Yield Curve with Aytek Malkhozov, Philippe Mueller, and Andrea Vedolin (ssrn version)
Review of Financial Studies, 2016, 29, 1220-1253
Risk in mortgage-backed securities (MBS) drives the level and volatility of interest rates: (i) MBS duration positively predicts nominal and real excess bond returns, especially for longer maturities; (ii) the predictive power of MBS duration is transitory in nature; (ii) MBS convexity increases the volatility of all yields, and this effect has a hump-shaped term structure.
Central Bank Communication and the Yield Curve with Matteo Leombroni, Andrea Vedolin, and Paul Whelan (November 2016)
ECB target rate shocks have little impact on Eurozone yields, while (i) communication shocks drive yields, especially for intermediate maturities; (ii) negative communication shocks raise the yield spread between peripheral and core countries; (iii) this cross-sectional difference arises after the 2008 financial crises; (iv) higher credit risk amplifies the effect of communication shocks, especially for core countries.
Revise and resubmit at the Review of Financial Studies
We construct daily global and local (country-specific) illiquidity proxies from yield curves, and we show both theoretically and in the data that (i) higher global illiquidity implies a flatter SML, (ii) stocks with higher local illiquidity and lower beta earn higher alphas and Sharpe ratios, (iii) illiquidity improves the performance of BAB-like strategies.
Multiple Equilibria in Noisy Rational Expectations Economies with Dömötör Pálvölgyi (February 2015)
Revise and resubmit at Econometrica
Standard noisy REE models, i.e., Grossman and Stiglitz (1980) and Hellwig (1980), have equilibria that were previously ignored. These feature jumps & crashes, price drift, priced skewness, and can be arbitrarily close to being fully revealing.
We show that in several multi-asset, asymmetric information noisy REE models the linear equilibrium that can be found with the "conjecture and verify" method is the unique equilibrium in which the price function is continuous. (A generalization of some results from Multiple Equilibria in Noisy Rational Expectations Economies.)
Short-sale Constraints and Credit Runs (December 2015)
Security prices contain less information under short-sale constraints, but they can be more informative to some agents who have additional private information. This, in turn, can lead to higher allocative efficiency in the real economy.
Financially constrained strategic arbitrage (under revision)
Marking-to-market endogenously creates cooperative/predatory trading among arbitrageurs with price impact. This predatory threat can either (i) lead to slow initial investment and slow price convergence, or (ii) arbitrageurs bet on early/late convergence, leading to two groups with different mean, variance and skewness of returns, and predation in equilibrium.