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Recent Developments in Financial Risk and the Real Economy

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  • Ian Dew-Becker
  • Stefano Giglio

Abstract

This paper reviews recent developments in macro and finance on the relationship between financial risk and the real economy. We focus on three specific topics: the term structure of uncertainty, time variation - and specifically the long-term decline - in the variance risk premium, and time variation in conditional skewness. We also introduce two new data series: implied volatility from one-day options on grains for the period 1906-1936, and on cliquet options, which provide insurance against single-day crashes on the S&P 500, both of which give some context to the recent rise in trade in extremely short-dated options. Finally, we discuss new avenues for future research.

Suggested Citation

  • Ian Dew-Becker & Stefano Giglio, 2023. "Recent Developments in Financial Risk and the Real Economy," NBER Working Papers 31878, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31878
    Note: AP DAE EFG IFM ME
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    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • N2 - Economic History - - Financial Markets and Institutions

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