CEF.UP – FIN Seminar/Webinar

Thursday – May 19^th, 2022 at 1:00 p.m. |Room 305| Online

“Negotiating Compensation“

Vladimir Vladimirov – University of Amsterdam (joint work with Florian Hoffmann)

Abstract:

“Workers can often negotiate their compensation. We develop a model showing that optimal negotiations and compensation design depend on whether capital and labor are substitutes or complements. This distinction — closely related to whether labor is low- or high-skilled — further affects whether workers can extract higher compensation by negotiating with fewer firms or by searching for additional job offers. It also affects whether cash constraints inflate or depress compensation when firms compete for workers. By solving for the optimal mechanism for workers to sell their labor, we further show how workers can compare different types of offers and negotiate with firms with different bargaining power.”

CEF.UP – FIN Seminar/Webinar

Thursday – May 5^th, 2022 at 1:00 p.m. |Room 305| Online

“The Correlation Risk Premium Term Structure “

Gonçalo Faria – Universidade Católica Portuguesa (joint work with Robert Kosowski)

Abstract:

“The aim of this paper is to study the term structure of correlation risk and exploit a unique dataset of correlation swap quotes. The main empirical findings are supported by a general equilibrium asset pricing model that endogenously generates a correlation risk term structure. We analyse two alternative measures of correlation risk and their term structure, based on S&P500 correlation swap quotes and the synthetic correlation swap rates estimated from option prices. Our main empirical findings are supported by a Lucas Orchard type model with heterogeneous agents that differ in their beliefs about the probability of a systemic rare disaster. When the latter occurs, there is an increase in the dispersion in beliefs about expected consumption growth rate and in the consumption share of the more pessimistic agent. This generates a flattening of the term structure for both the risk neutral expected correlation and the correlation risk premium during periods of enhanced uncertainty.”