Research areas
- Rare disaster models and their implications for the equity premium, risk-free rate, and cross-section of returns
- Recursive utility and dynamic asset pricing with jump-diffusion processes
- Term structure of interest rates
- Predictability of stock returns
Key papers
Recent work
Chief Economist of the SEC (2021-2022). Known for the Wachter (2013) rare disaster model extending Rietz-Barro disaster framework with time-varying disaster probability.
Collaborators
- Jerry Tsai (co-author on long-lived securities pricing)
- Martin Lettau (co-author on equity strip pricing)
My notes
Wachter’s work on exact solutions for long-lived asset prices via strip decomposition (with Tsai) is methodologically related to the CRE project’s Riccati-based pricing approach. Her emphasis on rare-event risk and the breakdown of covariance-based factor models connects to the regime-switching risk pricing in the CRE model.