chain and which accounts for default and liquidity risk. A representation of the bond price dynamics, which separates three … different types of risk, was obtained. Introducing the risk of systematic changes in the market liquidity added more risks. A …

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 …

pricing model. Implied volatility smiles appear to be explained by the negative asymmetry of the filtered historical … hedging in the presence of large volatility shocks. …

This paper extends the class of deterministic volatility Heath-Jarrow-Morton (1992) models to a Markov chain stochastic … volatility framework allowing for jump discontinuities and a variety of deformations of the term structure of forward rate … volatilities. Analytical solutions for the dynamics of the volatility term structure are obtained. Semimartingale decompositions of …

from a given set defined by the parametric volatility specification and the structure of a continuous time Markov chain that … modulates the volatility function. The first stochastic volatility specification generates jump discontinuities in volatility and … shape-preserving evolution of the volatility term structure in thefuture. The second specification allows, in addition, for …

) estimation of the conditional mean vector and the conditional volatility matrix of a multivariate interest rate series. The … principal components, a multivariate CCC-GARCH model, or the exponential smoothing volatility forecasting technique used by the …

We show that the volatility of a price process, which is usuallyregarded as an impediment to financial growth, can serve …

and Stein stochastic volatility model driven by two correlated Brownian motion. It turns out that in case the mean …