In this article, we review recent developments in macroeconomics 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—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 prices of cliquet options, which provide insurance against single-day crashes on the S&P 500. Both series give some context to the recent rise in trade in extremely short-dated options. Finally, we discuss new avenues for future research.


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  • Article Type: Review Article
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