We propose a new model of exchange rates, which yields a theory of the forward premium puzzle. Our explanation combines … values for the volatility of the exchange rate, the forward premium puzzle regression coefficients, and near-random walk …

uncertainty. The results dictate the role of uncertainty and volatility in structural models and we show they are consistent with …

the spot volatility extracted from the options and the one obtained nonparametrically from high-frequency data on the … underlying asset. We further construct new formal tests of the model fit for specific regions of the volatility surface and for … index options we extend the popular double-jump stochastic volatility model to allow for time-varying jump risk premia and a …

major finding is that the volatility of interest rates is increasing in the level of interest rates only for sharply upward …

procedure. It is argued in this paper that part of the very large increase in interest rate volatility which resulted from the …

explored that evidence of excess volatility need not imply the existence of unexploited profit opportunities under the rational …

theoretically that volatility in fundamental variables such as the nominal interest rate that drive exchange rate volatility can … investment on exchange rate volatility. It is the first paper to provide empirical evidence that interest rate volatility may …

We develop a tractable and flexible stochastic volatility multi-factor model of the term structure of interest rates …

Current debates on globalization have tended to focus on financial market volatility and contagion. In fact, many … whether there has been volatility contagion from Mexico to the two South American nations. The results obtained from the … estimation of augmented GARCH equations indicate, quite strongly, that while there has been volatility contagion from Mexico to …