One-factor no-arbitrage models of the short rate are important tools for valuing interest rate derivatives. Trees are often used to implement the models and fit them to the initial term structure. This paper generalizes existing tree building procedures so that a very wide range of interest rate...

Equity options display a strong factor structure. The first principal components of the equity volatility levels, skews, and term structures explain a substantial fraction of the cross-sectional variation. Furthermore, these principal components are highly correlated with the S&P500 index option...

In this paper, we propose a way to construct a single forward-looking model for interest rates, which represents their evolution under both the Q-measure and P-measure (a joint measure model). As is well known, the market prices of contingent claims are independent of investor risk preferences....

We present a new discrete-time GARCH jump framework that allows for rich dynamics in higher moments by combining heteroskedastic processes with fat-tailed innovations in returns and volatility. We provide a tractable risk neutralization framework allowing for option valuation with separate...