Much of the research describing the cross-sectional and time series behavior of asset returns can be characterized as a search for the relevant state variables and also a search for the relevant model specification. Ultimately the scope of such efforts is to find a satisfactory and stable asset...

Subordinated stochastic processes, also called time deformed stochastic processes, have been proposed in a variety of contexts to describe asset price behavior. They are used when the movement of prices is tied to the number of market transactions, trading volume or the more illusive concept of...

In this paper, we study stochastic volatility models with time deformation. Such processes relate to early work by Mandelbrot and Taylor (1967), Clark (1973), Tauchen and Pitts (1983), among others. In our setup, the latent process of stochastic volatility evolves in a operational time which...

Simulation-based estimation methods have become more widely used in recent years. We propose a set of tests for structural change in models estimates via Simulated Method of Moments (see Duffie and Singleton (1993)). These tests extend the recent work of Andrews (1993) and Sowell (1996a, b)...

Several estimation procedures such as the Efficient Method of Moments (EMM) of Gallant and Tauchen (1996) and Indirect Inference procedure of Gouriéroux, Monfort and Renault (1993) involve two models, an auxiliary one and a model of interest. The role played by both models poses challenges and...

Many continuous time term structure of interest rate models assume a factor structure where the drift and volatility functions are affine functions of the state variable process. These models involve very specific parametric choices of factors and functional specifications of the drift and...

Understanding the dynamics of interest rates and the term structure has important implications for issues as diverse as real economic activity, monetary policy, pricing of interest rate derivative securities and public debt financing. Our paper follows a longstanding tradition of using factor...