Over the last 10 years or so a mathematical theory of bubbles has emerged, following a martingale theory based on an … absence of arbitrage, as opposed to an equilibrium theory. This paper attempts to explain the major developments of the theory … recent development of a theory of bubble detection. Critiques of the theory are presented, and a defense is offered …

financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of G … this more complex situation and consider stock price dynamics which exclude arbitrage opportunities. Due to volatility … claims and deduce explicit results in a Markovian setting. -- Pricing of contingent claims ; incomplete markets ; volatility …

conditioning on skewness increases the predictive power of the volatility spread and that coefficient estimates accord with theory … of the volatility spread to skewness. We measure skewness from option prices and test these predictions. We find that … the term structure of option-implied volatility, skewness and kurtosis and find that time-dependence in returns has a …

changes in equity volatility can be explained by the volatility of the firm's assets, its market leverage and investors … underlying factors affect changes in equity volatility as well as giving an indication of how the financial markets view the …

financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of G … this more complex situation and consider stock price dynamics which exclude arbitrage opportunities. Due to volatility …

In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks … traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a …-form and structural models of stochastic volatility …

We document a higher bond return volatility around the time of default for bonds included in CDS auctions (especially … stock return volatility of CDS firms and non-CDS firms around the time of default. These results are more consistent with …

generalization of the Black Scholes formula. Both alternatives generate implied volatility skew. Hence, the sudden appearance of the …