Research

Working papers

• Risk Seeking (with Jun Liu and Kai Li)
  • People are risk-seeking in certain situations, though they are normally risk-averse. The loss aversion utility function provides such an example. Risk seeking is largely understudied, probably because it usually does not allow optimal choices and are not tractable. In this paper, we study the implications when risk seeking is incorporated into the agent’s preferences. We show that risk seeking dramatically alters the agent’s behaviors in stressed scenarios. It is optimal to take large long or short positions and shun positions involving moderate levels of risk. The agent can swing between sizable long and short positions with minor changes in market conditions. The agent may short an asset with a positive risk premium. These behaviors are consistent with findings in experimental and market settings but cannot be explained by risk-averse preferences.

Research in Progress

• Option Implied Beliefs and Forward Guidance
  • Coming Soon

• Arbitrage-Free Extraction of Latent Economic Factors (with Jun Liu and Jun Pan)

  • Presented: Rady School of Management Finance Brown Bag
• Relationship between Corporate Yield Spread and Treasury Yield (with Jun Liu and Jun Pan).
  • Investigating the relationship between short rate and yield spread. Q: Can yield spread increase with short rate?
  • Empirical result says yes. How can we explain it?
  • Temp_Slides