which current volatility is easily estimated from historical asset prices observed at discrete intervals. Empirical analysis … Black-Scholes model is updated every period and uses implied volatilities from option prices, while the parameters of the … GARCH model are held constant and volatility is filtered from the history of asset prices. The improvement is due largely to …

the discount rate function directly to bond prices. ; The tests demonstrate the dangers of in-sample goodness-of-fit as … detect misspecification of the underlying pricing equation relating the term structure to bond prices. These tests establish … the presence of unspecified, but nonetheless systematic, omitted factors in the prices of long maturity notes and bonds …