American call and put options on the S&P 500 index futures that violate the stochastic dominance bounds of Constantinides and Perrakis (2007) over 1983-2006 are identified as potentially profitable investment opportunities. Call bid prices more frequently violate their upper bound than put bid...

Stochastic volatility (SV) models provide a means of tracking and forecasting the variance of financial asset returns. While SV models have a number of theoretical advantages over competing variance modelling procedures they are notoriously difficult to estimate. The distinguishing feature of...

We consider the hedging of derivative securities when the price movement of the underlying asset can exhibit random jumps. Under a one factor Markovian setting, we derive a spanning relation between a long term option and a continuum of short term options. We then apply this spanning relation to...

State space alternative to autoregressive conditional heteroskedasticity models are proposed. The initial model, which is labelled the Gaussian local scale model, has a measurement density which is Gaussian, conditional on the unobservable precision. The precision is assumed to be a gamma...

This paper is concerned with simulation-based inference in generalized models of stochastic volatility defined by heavy-tailed Student-t distributions (with unknown degrees of freedom) and exogenous variables in the observation and volatility equations and a jump component in the observation...

This paper derives the exact distribution of the maximum likelihood estimator of a first-order linear autoregression with an exponential disturbance term. We also show that, even if the process is stationary, the estimator is T-consistent, where T is the sample size. In the unit root case, the...

In this paper we review some recent work on limit results on realised power variation, that is, sums of powers of absolute increments of various semimartingales. A special case of this analysis is realised variance and its probability limit, quadratic variation. Such quantities often appear in...

In this article we provide an asymptotic distribution theory for some nonparametric tests of the hypothesis that asset prices have continuous sample paths. We study the behaviour of the tests using simulated data and see that certain versions of the tests have good finite sample behavior. We...

This paper is concerned with the Bayesian analysis of stochastic volatility (SV) models with leverage. Specifically, the paper shows how the often used Kim et al. [1998. Stochastic volatility: likelihood inference and comparison with ARCH models. Review of Economic Studies 65, 361–393] method...

This paper assesses the roles of various factors influencing the volatility of crude oil prices and the possible linkage between this volatility and agricultural commodity markets. Stochastic volatility models are applied to weekly crude oil, corn and wheat futures prices from November 1998 to...