The main result of the paper is a formula for zero time-to-maturity limit ofimplied volatilities of European options under a broad class of stochastic volatilitymodels. Based on this formula, we propose a closed-form approximation of theimplied volatility smile.[...]

This paper deals with asymptotically efficient estimation in exchangeable nonlinear dynamicpanel models with common unobservable factor. These models are especially relevantfor applications to large portfolios of credits, corporate bonds, or life insurance contracts, andare recommended in the...

We propose an affine term structure model which accommodates non-linearities in the drift and volatility function of the short-term interest rate. Such non-linearities are a consequence of discrete beta-distributed regime shifts constructed on multiple thresholds. We derive iterative closed form...

Risk management and asset pricing benefit from simple functional descriptions of the distribution of real asset returns. Recently, several authors have proposed that asset returns in real stock markets are distributed according to a hyperbolic distribution. While asset returns are generated by...

In this paper, we propose a model based on multivariate decomposition of multiplicative - absolute values and signs - components of several returns. In the m-variate case, the marginals for the m absolute values and the binary marginals for the m directions are linked through a 2m-dimensional...

We study an equilibrium asset pricing model with several Lucas (1978) trees subject toevent risk, that is, the possibility that trees experience unexpected disasters. We exploit themarket clearing mechanism, in the presence of multiple positive net supply assets, to showthat the implications of...

We develop a new completely affine model of the term structure of interest rates, in which the statevariables evolve as a matrix-valued process of stochastically correlated factors. This setting grants a newelement of flexibility in the simultaneous modeling of stochastic volatilities and...

This pap er intro duces a general framework for market mo dels, namedM arket M o del Approach, through the concept of admissible sets of for-ward swap rates spanning a given tenor structure. We relate this conceptto results in graph theory by showing that a set is admissible if and only ifthe...