Sang Byung Seo

Associate Professor of Finance
Harold G. and Margaret W. Laun Professor in Finance

Wisconsin School of Business
University of Wisconsin–Madison

5253 Grainger Hall
975 University Avenue
Madison, WI 53706-1324

E-mail: sang.seo@wisc.edu | Phone: (608) 262-9777
CV | SSRN | Google Scholar

EDUCATION

The Wharton School, University of Pennsylvania
Ph.D. & M.A. in Finance, 2010 – 2015

KAIST (Korea Advanced Institute of Science and Technology)
B.S. in Management Engineering & Mathematics, 2003 – 2007

PUBLISHED AND ACCEPTED PAPERS

Do Rare Events Explain CDX Tranche Spreads?, with Jessica A. Wachter

Journal of Finance 73 (5): 2343-2383, October 2018. Internet Appendix
Awarded Marshall Blume Prize in Financial Research (honorable mention)

Option Prices in a Model with Stochastic Disaster Risk, with Jessica A. Wachter

Management Science 65 (8): 3449-3469, August 2019.

Learning, Slowly Unfolding Disasters, and Asset Prices, with Mohammad Ghaderi and Mete Kilic

Journal of Financial Economics 143 (1): 527-549, January 2022. Internet Appendix
Previously circulated under the title "Slowly Unfolding Disasters"

Characterizing the Variance Risk Premium: The Role of the Leverage Effect, with Guanglian Hu and Kris Jacobs

Review of Asset Pricing Studies 12 (2): 500-542, June 2022.

Synthetic Options and Implied Volatility for the Corporate Bond Market, with Steven Chen and Hitesh Doshi

Journal of Financial and Quantitative Analysis 58 (3): 1295-1325, May 2023. Internet Appendix
Previously circulated under the titles "Corporate Bond VIX" and "Ex Ante Risk in the Corporate Bond Market: Evidence from Synthetic Options"
Data: Corporate Bond VIX time series

Why Do Rational Investors Like Variance at the Peak of a Crisis? A Learning-Based Explanation, with Mohammad Ghaderi and Mete Kilic

Journal of Monetary Economics, 142, March 2024. Internet Appendix

The Risk and Return of Equity and Credit Index Options, with Hitesh Doshi, Jan Ericsson, and Mathieu Fournier

Journal of Financial Economics, 161, November 2024. Internet Appendix
Previously circulated under the title "Asset Variance Risk and Compound Option Prices"

Options on Interbank Rates and Implied Disaster Risk, with Hitesh Doshi and Hyung Joo Kim

Journal of Financial and Quantitative Analysis, Forthcoming. Internet Appendix
Best Paper Award Semifinalist, FMA

Is There a Macro-Announcement Premium?, with Mohammad Ghaderi

Management Science, Accepted. Internet Appendix

WORKING PAPERS

Learning and Subjective Beliefs About Good and Bad Inflation Ranges, with Mohammad Ghaderi and Ivan Shaliastovich

Previously circulated under the title "Learning, Subjective Beliefs, and Time-Varying Preferences for Different Inflation Ranges"

Abstract: We identify desirable/undesirable inflation outcomes under subjective beliefs by comparing survey-based and risk-adjusted distributions of inflation. Intuitively, investors dislike inflation at both extremes, preferring a range in the middle. This "good inflation" region, which investors associate with lower-than-average marginal utility, varies substantially over time in position and width, revealing time-varying preferences across inflation ranges. Different ranges contribute to the inflation risk premium with mixed signs, offsetting each other and often masking important insights into the pricing of inflation risk. We rationalize these empirical patterns using a model where investors learn and update beliefs about hidden deflationary and inflationary recession states.

Reconstructing a Century of U.S. Corporate Bonds: Credit Risk in Historical Perspective, with Mohammad Ghaderi, Sebastien Plante, and Nikolai Roussanov

Elements of this paper previously circulated as part of an earlier version of "Pricing of Corporate Bonds: Evidence from a Century-Long Cross-Section"

Abstract: Do corporate bond investors earn compensation for bearing credit risk? We construct a new historical corporate bond database spanning 128 years, from 1895 to 2022, which allows us to estimate a corporate bond counterpart to the equity risk premium. Combining hand-collected monthly corporate bond quotes from three archival print sources with modern datasets, we assemble a panel comprising over 100,000 unique bonds and more than 7 million observations. While evidence from recent samples suggests that corporate bond excess returns are driven largely by the term premium similar to that earned by U.S. Treasuries, our longer historical sample reveals a sizable and statistically significant credit risk premium. Aggregate credit spreads predict future corporate bond returns and macroeconomic aggregates, although their predictive power for business cycle fluctuations weakens when prewar data, including the Great Depression, are added.

Pricing of Corporate Bonds: Evidence From a Century-Long Cross-Section, with Mohammad Ghaderi, Sebastien Plante, and Nikolai Roussanov

CRSP Award in Investment and Asset Pricing, Midwest Finance Association
Best Paper Award in Asset Pricing, Northern Finance Association

Abstract: To be updated soon!

INACTIVE WORKING PAPERS

CDS-Implied Risk of Economic Catastrophes

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