This paper examines the ability of several different continuous-time one and two-factor jump-diffusion models to capture the dynamics of the VIX volatility index for the period between 1990 and 2010. For the one-factor models we study affine and non-affine specifications, possibly augmented with...

This paper examines the ability of twelve different continuous-time two-factor models with mean-reverting stochastic volatility to capture the dynamics of the S&P 500 and three European equity indices. The stochastic volatility models are the square root variance, GARCH, and log volatility...

This paper implements a variety of different calibration methods applied to the Heston model and examines their effect on the performance of standard and minimum-variance hedging of vanilla options on the FTSE 100 index. Simple adjustments to the Black-Scholes-Merton model are used as a...

This paper examines the ability of several different continuous-time one- and two-factor jump-diffusion models to capture the dynamics of the VIX volatility index for the period between 1990 and 2010. For the one-factor models we study affine and non-affine specifications, possibly augmented...

This paper investigates the determinants of the iTraxx CDS Europe indices, finding strong evidence that they are regime dependent. During volatile periods credit spreads become highly sensitive to stock volatility and more sensitive to this than to stock returns. They are also almost immune to...

Credit default swap (CDS) spreads display pronounced regime specific behaviour. A Markov switching model of the determinants of changes in the iTraxx Europe indices demonstrates that they are extremely sensitive to stock volatility during periods of CDS market turbulence. But in ordinary market...

This paper studies alternative distributions for the size of price jumps in the S&P 500 index. We introduce a range of new jump-diffusion models and extend popular double-jump specifications that have become ubiquitous in the finance literature. The dynamic properties of these models are tested...

This article provides comprehensive tests of alternative jump-diffusion models for the purpose of hedging S&P 500 options. We explicitly take into account the risk arising from price and variance jumps and assess the hedging performance by focusing on the ability of competing specifications to...