A large chunk of U.S. equity derivative payoffs are biased due to a price drift in the run up to expiration. The bias generates a wealth transfer of 4 billions USD per year in SPX options alone. We argue the likely reason for this bias is due to market maker hedges practices.


We measure subjective expected returns in real time from an international panel of survey forecasters. We document their properties showing they are subjectively cyclical and that they obey a risk return trade-off, even though beliefs deviate from rational benchmarks. Imbedding risk based pricing and deviations from full information rationality we develop and estimate a subjective asset pricing model with a long run belief distortion that captures these facts. 


We measure subjective expected returns in real time from an international panel of survey forecasters. We document their properties showing they are subjectively cyclical and that they obey a risk return trade-off, even though beliefs deviate from rational benchmarks. Imbedding risk based pricing and deviations from full information rationality we develop and estimate a subjective asset pricing model with a long run belief distortion that captures these facts. 


Black (1993) famously argues money is like an option - we develop this arguement in a tractable general equilibrium model through a cash-in-advance constraint. Leveraging option pricing techniques we solve the model in closed form which delivers clean predictions linking inflation expectations and the term structure of interest rate volatility - we show these predictions are clearly detectable in the data. 


We explore the small-sample properties and biases that arise in GMM-based asset pricing tests and conclude that proxying for the return on wealth via the return on the market renders point estimates of preference parameters meaningless. Quantifying the size of empirical distortions in theory and via simulation we argue that consumption based asset pricing might not be so bad.  


We show that depth in E-mini equity index futures has declined by 80% in recent years, driven by fewer active liquidity providers (LPs) rather than reduced individual LP capacity. To explain this, we propose a model of endogenous liquidity provision with rising participation costs. Consistent with the model, we find that while the relationship between expected returns, volatility, and illiquidity has remained stable, the relationship with depth and LP numbers is non-monotonic. LPs withdraw rapidly in high-volatility, low-illiquidity states despite high expected returns. LP numbers also capture information about market fragility that conventional liquidity measures miss.


We document and explain a term structure of TIPS-Treasury mispricing that increases monotonically with maturity, consistent with a duration mismatch between the long-maturity supply of TIPS and short-maturity demand from preferred-habitat investors. A Fama-Bliss style decomposition shows that the mispricing spread predicts excess profits, particularly at long maturities where it is almost entirely consumed as compensation for arbitrage risk. An equilibrium model with constrained intermediaries and preferred-habitat demand rationalises these findings: mispricing reflects compensation for scarce capital and convergence risk across maturity segments.