This paper analyzes one potential source of misspecification of existing models of the short-term interest rate and introduces a new class of discrete-time econometric specifications that nests many existing interest rate models as special cases. In existing continuous-time or time-series...

This paper compares the empirical performance of a wide variety of well-known diffusion models - with particular emphasis on the Black, Derman, and Toy (1990) term structure model - in capturing the dynamic behavior of interest rate volatility. Many popular models are nested within a more...

I introduce two-factor discrete time stochastic volatility models of the short-term interest rate to compare the relative performance of existing and alternative empirical specifications. I develop a nonlinear asymmetric framework that allows for comparisons of non-nested models featuring...

Due to the near unit-root behavior of interest rates, the movements of individual interest-rate series are inherently difficult to forecast. In this paper, we propose an innovative way of applying dynamic term structure models to forecast interest-rate movements. Instead of directly forecasting...

Hedge funds' extensive use of derivatives, short-selling, and leverage and their dynamic trading strategies create significant non-normalities in their return distributions. Hence, the traditional performance measures fail to provide an accurate characterization of the relative strength of hedge...

Hedge funds' extensive use of derivatives, short-selling, and leverage and their dynamic trading strategies create significant non-normalities in their return distributions. Hence, the traditional performance measures fail to provide an accurate characterization of the relative strength of hedge...

This paper investigates how the stock market reacts to firm level liquidity shocks. We find that negative and persistent liquidity shocks not only lead to lower contemporaneous returns, but also predict negative returns for up to six months in the future. Long-short portfolios sorted on past...

Aumann and Serrano (2008) and Foster and Hart (2009) introduce riskiness measures based on the physical return distribution of gambles. This paper proposes model-free options' implied measures of riskiness based on the risk-neutral distribution of financial securities. In addition to introducing...

Stocks with large increases in call implied volatilities over the previous month tend to have high future returns while stocks with large increases in put implied volatilities over the previous month tend to have low future returns. Sorting stocks ranked into decile portfolios by past call...