the mean and volatility of equity returns. Our model assumes a small risk of a rare disaster that is calibrated based on … turns out to be crucial to the model's ability to explain both equity volatility and option prices. We explore different …

impose tight upper and lower bounds on the implied volatility …

-of-sample volatility of optimized portfolios from each model. A few factors capture the general covariance structure but adding more … yield similar results. Using a tracking error volatility criterion, larger differences appear, with particularly favorable …

information-based model demonstrates that the correlation of beliefs implied by analyst forecasts leads to return correlations … broadly in line with the data, both in levels and across countries - the correlation between predicted and actual is 0.63. Our … findings have implications for market-wide volatility - the model-implied correlations alone can explain 44% of the cross …

of a range of valuation and econometric problems. Example applications include fixed-income pricing models, with a role … for intensityy-based models of default, as well as a wide range of option-pricing applications. An illustrative example … examines the implications of stochastic volatility and jumps for option valuation. This example highlights the impact on option …

We conduct a comprehensive analysis of unspanned stochastic volatility in commodity markets in general and the crude …-oil market in particular. We present model-free results that strongly suggest the presence of unspanned stochastic volatility in … the crude-oil market. We then develop a tractable model for pricing commodity derivatives in the presence of unspanned …

We use a novel pricing model to filter times series of diffusive volatility and jump intensity from Samp;P 500 index … about twice the premium required to compensate the same investor for the realized volatility, 5.8 percent. Moreover, the ex …

In pricing primary-market options and in making secondary markets, financial intermediaries depend on the quality of … forecasts of the variance of the underlying assets. Hence, the gain from improved pricing of options would be a measure of the … pricing index options of up to 90-days maturity would be more accurate when: (1) using ARCH specifications in place of a …

This paper studies the pricing of volatility risk using the first-order conditions of a long-term equity investor who … volatility. Empirically, we present novel evidence that low-frequency movements in equity volatility, tied to the default spread …