investigate the two most prominent puzzles related to low-frequency stock prices: The conditional volatility of price returns, and … to approximate the conditional volatility, quantified with a GARCH(1,1) process, that is observed in empirical price data …

existing methods lies in its straightforward application to models with stochastic volatility and stochastic interest rates. We … exploit this advantage by providing an analysis of the impact of volatility mean-reversion, volatility of volatility, and …

order belief", on asset price volatility. The paper shows that heterogeneous expectations induce higher order beliefs and … that heterogeneous expectation asset pricing models thoretically generate more volatility than rational expectation models … results shows that a model with higher order beliefs generates a level of volatility in line with the price volatility …

and economically strong effect on the implied volatility of currency options, on the shap e of the implied volatility … smile, on the volatility risk-premia, and on future currency returns. We do cument that the volatility of macro economic …

investors perhaps overestimate the volatility of equity returns. Both facts reduce the puzzle. However, data on beliefs about … output volatility (Survey of Professional Forecasters) shows marked overconfidence. On balance, the equity premium is …

stochastically, we find that plausible levels of macroeconomic volatility are compatible with highly variable corporate valuations, P …

volatility and risk aversion that are similar to the ones observed in the data. In addition, the model produces an implied …

are applied in a stochastic volatility model to get efficient derivative prices, to measure the uncertainty of estimated …

simultaneous modeling of stochastic correlation and volatility. The solutions of the model are in closed form and include an … correlation risk is a non-negligible fraction of the myopic portfolio, which often dominates the pure volatility hedging demand …