Maximum likelihood estimation of discretely observed diffusion processes is mostly hampered by the lack of a closed form solution of the transient density. It has recently been argued that a most generic remedy to this problem is the numerical solution of the pertinent Fokker-Planck (FP) or...

The uncovered interest rate parity puzzle questions the economic relation existing between short term interest rate differentials and exchange rates. One would indeed expect that the differential of interest rates between two countries should be offset by an opposite evolution of the exchange...

This paper analyzes empirical market utility functions and pricing kernels derived from the DAX and DAX option data for three market regimes. A consistent parametric framework of stochastic volatility is used. All empirical market utility functions show a region of risk proclivity that is...

Recent calculations have suggested that the German federal government has saved roughly EUR 90-100 billion, cumulatively, due to low bond yields since the onset of the Euro crisis. In order to determine the contribution of the "flight to quality" to this sum, we define the flight to quality as a...

This online appendix to "Violations of Uncovered Interest Rate Parity and International Exchange Rate Dependences" includes the copula density function for the Clayton-Frank-Gumbel mixture copula and the details for the likelihood based estimation of the multivariate currency basket log returns....

This paper examines the commonality in liquidity measures in two stock markets at different stage of development, the Deutsche Börse and the Warsaw Stock Exchange. Using daily data from 2001 to 2016 we show that since 2005 the aggregate liquidity measures from both markets behave similarly...

This chapter deals with nonparametric estimation of the risk neutral density. We present three different approaches which do not require parametric functional assumptions on the underlying asset price dynamics nor on the distributional form of the risk neutral density. The first estimator is a...

Affine term structure models of bond yields are important tools for analyzing fixed income markets and monetary policy. Estimators of Adrian, Crump, and Mönch (2013) and Diez de Los Rios (2015) replace time-consuming nonlinear search procedures with a set of simple linear regressions. However,...