Risk based Interest Rate Expectations (job market paper, coming soon)

I develop a new method to extract interest rate expectations from option markets that circumvents the challenges of non-stationary interest rate levels. The approach leverages a no-arbitrage relationship linking term premia to variance risk premia observable in swaptions markets. Under the assumption that investors' marginal utility has limited nonlinear exposure to interest rates, I can convert variance risk premia directly into term premium estimates without specifying the dynamics of interest rate levels. Using USD swaptions data from 2002 to 2023, I document three main findings. First, the unconditional term premium averaged 44 basis points annually on 10-year rates --- historical excess bond returns reflected large, anticipated risk premia rather than systematic forecast errors. Second, term premia constructed from variance forecasts significantly outperform standard affine term structure models and survey expectations in predicting excess bond returns out-of-sample, achieving a Sharpe ratio of 0.73 versus -0.17 for a traditional term structure model. Third, the puzzling secular decline in long-term rates during FOMC announcement windows is accompanied by sharp, transitory compressions in risk-neutral variance that are difficult to reconcile with information revelation but consistent with temporary risk premium effects. The method provides a tractable, theory-based alternative to traditional term structure modeling.

Equity Valuation without DCF (coming soon) with Christopher Polk and Thummim Cho

• Conferences: NBER Summer Institute 2025 (presenting author), SFS Cavalcade 2025 (presenting author), Red Rock 2025, AFA 2025 (scheduled), Junior Finance Conference on Valuation 2025 (presenting author)

We introduce discounted alphas, a novel framework for equity valuation. Our approach circumvents the need for stock-level cost-of-equity estimates required in discounted cash flow (DCF) valuation and identifies economically important variation in fundamental value not captured by best-in-class DCF methods. We find that discretionary buy-and-hold funds tilt toward characteristics that predict underpricing but not short-term alphas and that private equity funds appear to capture substantial CAPM misvaluation, both initially at buyout and subsequently at exit. However, despite these pockets of misvaluation, we find that firm equity values are "almost efficient" by Black's (1986) definition.

Bye Bye Beta: Deposit Duration with Fixed Spreads 

• Conferences: 2026 Contemporary Issues in Financial Markets & Banking (scheduled)

I show that bank demand deposits behave as perpetual interest rate options rather than simple floating-rate liabilities, creating dramatic swings in bank duration that match the behavior of bank stock prices. I document that deposit rates follow risk-free rates with fixed spreads of approximately 2% and near-complete long-run pass-through at high rates, challenging the conventional "deposit beta" framework. Valuing deposits using derivative pricing methods, I show that this option-like behavior alone generates large negative duration at low rates, without requiring negative cash flows or deposit runoff. These duration estimates successfully predict bank stock responses to monetary policy shocks (R2=10%), while existing measures fail. The framework resolves why deposit franchises switch from hedging to amplifying asset risk, why asset duration doesn't predict bank stock sensitivity, and why banks accumulated long-term securities precisely when yield curves were flattest (2010--2021). The findings have important implications for bank regulation, monetary policy transmission, and interest rate risk management.

Deposit Insurance & Bank Lending

Over the past 30 years, bank funding has shifted from small FDIC-insured deposits to large, uninsured deposits. This paper shows that insured deposits fund more lending, particularly business lending, while uninsured deposits are used to purchase more liquid securities. A natural experiment from the 1980 expansion of FDIC insurance limits demonstrates this effect is causal – deposit insurance leads to more business lending and more local business formation. The coefficients are economically large: a 10 ppt increase in the share of assets that are insured leads to a 2-4 ppt increase in loans to businesses as a share of assets and a 4-8% increase in the local number of businesses and employees. The long-term growth of large, uninsured deposits can therefore help explain the secular decline in banks' business lending as a share of balance sheet.

Bank vs Dealer Capital as a Priced Risk

Worshipful Company of International Bankers prize for best MSc dissertation

Recent papers have found that intermediary capital can explain prices across a number of asset classes (He, Kelly, Manela 2017; Adrian, Etula, and Muir 2021). I test intermediaries' explanatory power during the period of Glass-Steagall restrictions, in which commercial banks were ineligible to trade many categories of assets. Surprisingly, I do not find that the capital or assets of dealers eligible to trade asset classes explain those prices better than the ineligible banks. Instead, the ineligible commercial banks appear to explain prices better in the time series and at least as well in the cross-section. These findings provide some support for the idea that the apparent explanatory power of intermediaries arises passively, for example from correlation with time-varying risk preferences, rather than from their interaction with markets.

Awards: LSE Class Teacher Award 2023-24, & 2024-25

Courses:

• FM413: Fixed Income Markets for master's students (2022-2025)

• FM436: Financial Economics for master's students (2022-2025)

• Executive education:

  • • Effective Asset Management (2023-2025)

    • Fixed Income: Markets, Securities, and Institutions (2023)

• FM212: Principles of Finance (2021-2022)

Evaluations:  My latest teaching evaluation is available here

Material: For an example of teaching material I have written, please see my lecture notes on stochastic calculus for Financial Economics students here