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...

We develop a multivariate dynamic term structure model, which takes into account the nonlinear (time-varying) relationship between interest rates and the state of the economy. In contrast to the classical term structure literature, where nonlinearities are captured by increasing the number of...

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...

We develop a multivariate dynamic term structure model, which takes into account the nonlinear (time-varying) relation between interest rates and the state of the economy. In contrast to the classical term structure literature, in which nonlinearities are captured by increasing the number of...

Motivated by the need for an unbiased and positive-semidefinite estimator of multivariate realized covariance matrices, we model noisy and asynchronous ultra-high-frequency asset prices in a state-space framework with missing data. We then estimate the covariance matrix of the latent states...

Motivated by the need of an unbiased and positive-semidefinite estimator of multivariate realized covariance matrices, we model noisy and asynchronous ultra-high-frequency asset prices in a state-space framework with missing data. We then estimate the covariance matrix of the latent states...

We propose an a±ne 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...

We document that cross-sectional return predictions based on OLS and Lasso type linear methods contain no predictive power for large cap stocks over the last decades. Small and micro cap stocks are highly predictable throughout the entire sample. Based on the 68 firm characteristics (FC)...

As a means of validating an option pricing model, we compare the ex-post intra-day realized variance of options with the realized variance of the associated underlying asset that would be implied using assumptions as in the Black and Scholes (BS) model, the Heston and the Bates model. Based on...

We suggest a joint analysis of ex-post intra-day variability in an option and its associated underlying asset market as a novel means of validating an option pricing model. For this purpose, we introduce the notion of option realized variance, by which we mean the cumulative variance realized by...