About

Mikhail Chernov is a Professor of Finance and holds the Warren C. Cordner Chair in Money and Financial Markets at UCLA Anderson School of Management. His research focuses on macro-based asset pricing, derivatives, fixed income, and financial econometrics. He specializes in measuring various risks faced by financial markets and understanding how these risks translate into expected returns. His work emphasizes the importance of market crashes, private and sovereign defaults, and unexpected policy changes, especially events that occur infrequently but have devastating impacts on financial markets and the economy. Chernov's academic contributions have practical applications in risk management at financial institutions, providing quantitative tools to gauge potential losses and interpret high returns associated with rare but significant losses. He is particularly interested in the evolving nature of monetary policy and sovereign defaults, especially considering the historical view of sovereign borrowers as high-quality. With a background that includes faculty positions at the London School of Economics, London Business School, and Columbia Business School, as well as experience at the Bank of England, Federal Reserve Board, and Oxford-Man Institute of Quantitative Finance, Chernov is actively involved in international research collaborations. He is a research associate at the National Bureau of Economic Research and a research fellow at the Center for Economic and Policy Research, and has served as an editor for several prominent finance and econometrics journals.

Research topics

• Economics
• Monetary economics
• Macroeconomics
• Finance
• Financial economics
• Econometrics

Selected publications

• A macrofinance view of US Sovereign CDS premiums

  The Journal of Finance · 81 citations

  1st authorCorresponding
  • Economics
  • Monetary economics
  • Macroeconomics

  Premiums on US sovereign CDS have risen to persistently elevated levels since the financial crisis. In this paper, we ask whether these premiums reflect the probability of a US \emph{fiscal default}, namely a state in which budget balance can no longer be restored by further raising taxes or eroding the real value of debt by raising inflation. To that end, we develop a tractable equilibrium macrofinance model of the US economy, in which the fiscal and monetary policy stance jointly endogenously determine nominal debt, taxes, inflation and growth. While US CDS cannot be valued using standard replication arguments, we show how in our equilibrium model, CDS premiums reflect endogenous risk adjusted fiscal default probabilities. A calibrated version of the model is quantitatively consistent with high premiums on US sovereign CDS.

  DOI

• Unpriced Risks: Rethinking Cross-Sectional Asset Pricing

  National Bureau of Economic Research · 2025-07-01

  reportOpen access1st authorCorresponding

  Characteristic-based factors embed large unpriced components that depress Sharpe ratios and deviate from the mean-variance efficient (MVE) frontier.We discuss how to decompose tradable factor returns into priced (MVE) and unpriced components, showing that hedging unpriced variation realigns factors with efficiency.We outline theoretical conditions for characteristic portfolios to span the MVE and describe practical hedge-portfolio construction.In some asset classes-currencies and sovereign bonds-real-time estimation of the MVE is feasible.In the case of equities, one can hedge unpriced risks from characteristic-based factors.Empirically, unpriced risks account for 30-99% of factor return variance, and hedging can more than double Sharpe ratios.

  PublisherDOI

• The Comovement of Voter Preferences: Insights from U.S. Presidential Election Prediction Markets Beyond Polls

  National Bureau of Economic Research · 2025-01-01 · 1 citations

  reportOpen access1st authorCorresponding

  We propose a novel time-series econometric framework to forecast U.S. Presidential election outcomes in real time by combining polling data, economic fundamentals, and political prediction market prices.Our model estimates the joint dynamics of voter preferences across states.Applying our approach to the 2024 Presidential Election, we find a two-factor structure driving the vast majority of the variation in voter preferences.We identify electorally similar state clusters without relying on historical data or demographic models of voter behavior.Our simulations quantify the correlations between state-level election outcomes.Failing to take the correlations into account can bias the forecasted win probability for a given candidate by more than 10 percentage points.We find Pennsylvania to be the most pivotal state in the 2024 election.Our results provide insights for election observers, candidates, and traders.

  PublisherDOI

• A Test of the Efficiency of a Given Portfolio in High Dimensions

  SSRN Electronic Journal · 2025-01-01

  preprintOpen access1st authorCorresponding
  PublisherDOI

• A Test of the Efficiency of a Given Portfolio in High Dimensions

  SSRN Electronic Journal · 2025-01-01

  articleOpen access1st authorCorresponding
  PublisherDOI

• A Test of the Efficiency of a Given Portfolio in High Dimensions

  National Bureau of Economic Research · 2025-03-01 · 9 citations

  reportOpen access1st authorCorresponding

  We extend the Gibbons-Ross-Shanken test to high-dimensional cases, when the num-ber of test assets far exceeds the sample size and the return covariance matrix is ill-conditioned or singular, as inevitably occurs with large, richly specified test port-folios.In such cases, one must use a regularized (and therefore biased) estimator of the covariance matrix, which distorts the original GRS test statistic.We use Random Matrix Theory to correct for this bias and characterize the asymptotic power of the resulting test.Power increases with the number of test assets and reaches its maximum across a broad range of local alternatives.These findings are supported by extensive simulations.We empirically implement the test on state-of-the-art candidate factor portfolios and test assets to evaluate conditional asset pricing performance.

  PublisherDOI

• The Comovement of Voter Preferences: Insights from U.S. Presidential Election Prediction Markets Beyond Polls

  SSRN Electronic Journal · 2025-01-01 · 1 citations

  preprintOpen access1st authorCorresponding
  PublisherDOI

• Unpriced Risks: Rethinking Cross-Sectional Asset Pricing

  SSRN Electronic Journal · 2025-01-01

  articleOpen access1st authorCorresponding
  PublisherDOI

• The Comovement of Voter Preferences: Insights from U.S. Presidential Election Prediction Markets Beyond Polls

  SSRN Electronic Journal · 2025-01-01

  articleOpen access1st authorCorresponding
  PublisherDOI

• The Term Structure of Covered Interest Rate Parity Violations

  The Journal of Finance · 2024-03-31 · 15 citations

  articleOpen access

  ABSTRACT We quantify the impact of risk‐based and nonrisk‐based intermediary constraints (IC) on the term structure of covered interest rate parity (CIP) violations. Using a stochastic discount factor (SDF) inferred from interest rate swaps, we value currency derivatives. The wedge between model‐implied and observed derivative prices reflects the impact of nonrisk‐based IC because our SDF incorporates risk‐based IC. There is no wedge at short horizons, while the wedge accounts for 40% of long‐term CIP violations. Consistent with IC theory, the wedge correlates with the shadow cost of intermediary capital, and the SDF‐implied interest rate is a weighted average of collateralized and uncollateralized interest rates.

  PublisherOA PDFDOI

Frequent coauthors

• Dongho Song

  Johns Hopkins University

  56 shared

• Irina Zviadadze

  51 shared

• Jeremy J. Graveline

  41 shared

• Lars A. Lochstoer

  Anderson University - South Carolina

  41 shared

• Patrick Augustin

  26 shared

• Éric Ghysels

  20 shared

• Ruslan Bikbov

  Merrill (United States)

  18 shared

• Lukas Schmid

  18 shared

Awards & honors

• Numerous Dean’s Fellowships, Department of Mechanics and Mat…
• Kenneth J. Carey Memorial Fellowship, Smeal College of Busin…
• Center for International Business Education (CIBE) at Columb…
• The 2001 Arnold Zellner Award for the best Ph.D. thesis deal…
• JFE All-Star paper in 2005 for “A Study Towards a Unified Ap…