We find that firm-level variance risk premium, estimated as the difference between option-implied and expected variances, has a prominent explanatory power for credit spreads in the presence of market-and firm-level risk control variables identified in the existing literature. Such a predictability complements that of the leading state variable-leverage ratio-and strengthens significantly with lower firm credit rating, longer credit contract maturity, and model-free implied variance. We provide further evidence that: (1) variance risk premium has a cleaner systematic component and Granger-causes implied and expected variances, (2) the cross-section of firms' variance risk premia seem to price the market variance risk correctly, and (3) a structural model with stochastic volatility can reproduce the predictability pattern of variance risk premia for credit spreads.
We find that firm-level variance risk premium, estimated as the difference between option-implied and expected variances, has a prominent explanatory power for credit spreads in the presence of market-and firm-level risk control variables identified in the existing literature. Such a predictability complements that of the leading state variable-leverage ratio-and strengthens significantly with lower firm credit rating, longer credit contract maturity, and model-free implied variance. We provide further evidence that: (1) variance risk premium has a cleaner systematic component and Granger-causes implied and expected variances, (2) the cross-section of firms' variance risk premia seem to price the market variance risk correctly, and (3) a structural model with stochastic volatility can reproduce the predictability pattern of variance risk premia for credit spreads.
Radiation pressure refers to the momentum transfer of photons during light “particles” impacting a surface. The force is too small to drive microengines. Different from the classical radiation pressure, the indirect radiation pressure (Fm) is introduced, coming from the momentum change of light‐induced bubble expansion. Fm is shown to obey Fm ∼ (I·rb)2, behaving faster growth of indirect radiation pressure versus light intensity I and bubble radius rb. An effective bubble size range is identified for Fm to suppress other forces for bubble in liquid. The top laser irradiation on nanofluid is used in this experiment. A well‐defined bubble pulsating flow, being a new principle of bubble piston engine, is demonstrated. During pulse on (≈ns scale), Fm exceeding other forces generates an extremely large acceleration, which is three to four orders larger than the gravity acceleration, propelling the bubble traveling downward. During pulse off, the bubble is floating upward due to the nonexistence of Fm. In such a way, the piston engine sustains the oscillating ranges of 38–347 µm for bubble diameters and 2.7–457.9 µm for traveling distances of piston. This work is useful to manipulate bubble dynamics in solar energy systems, and can find various applications in optofluidics.
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