This paper assesses the empirical performance of an intertemporal option pricing model with latent variables which generalizes the Hull-White stochastic volatility formula. Using this generalized formula in an ad-hoc fashion to extract two implicit parameters and forecast next day S&P 500 option...

In this paper, we characterize the asymmetries of the smile through multiple leverage effects in a stochastic dynamic asset pricing framework. The dependence between price movements and future volatility is introduced through a set of latent state variables. These latent variables can capture...

We build and estimate an equilibrium model of the term structure of interest rates based on a recursive utility specification. We contrast it with an arbitrage-free model, where prices of risk are estimated freely without preference constraints. In both models, nominal bond yields are affine...