We classify the sentiment of a large sample of StockTwits messages as bullish,bearish or neutral, and create a stock-aggregate daily sentiment polarity measure.Polarity is positively associated with contemporaneous stock returns. On average,polarity is not able to predict next-day stock returns....

We use the term structure of spreads between rates on interest rate swaps indexed to LIBOR and overnight indexed swaps to infer a term structure of interbank risk. Using a dynamic term structure model, we decompose the term structure of interbank risk into default and non-default components. We...

We review the notion of a linearity-generating (LG) process introduced by Gabaix (2007) and relate LG processes to linear-rational (LR) models studied by Filipovic, Larsson, and Trolle (2017). We show that every LR model can be represented as an LG process and vice versa. We find that LR models...

We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors. The price of a CDS option can be uniformly approximated by...

We introduce a novel stochastic volatility model where the squared volatility of the asset return follows a Jacobi process. It contains the Heston model as a limit case. We show that the joint density of any finite sequence of log returns admits a Gram-Charlier A expansion with closed-form...

We study American swaptions in the linear-rational (LR) term structure model introduced. The American swaption pricing problem boils down to an optimal stopping problem that is analytically tractable. It reduces to a free-boundary problem that we tackle by the local time-space calculus. We...

We present a non-parametric method to estimate the discount curve from market quotes based on the Moore-Penrose pseudoinverse. The discount curve reproduces the market quotes perfectly, has maximal smoothness, and is given in closed-form. The method is easy to implement and requires only basic...