Multivariate return distributions consistent with bilateral gamma marginals are formulated and termed multivariate bilateral gamma (MBG). Tail probability distances and Wasserstein Distances between return data, model simulations and their squares evaluate model performance. A full Gaussian...

Market clichés assert that markets take escalators up and elevators down. The observation suggests differentiating models for up and down moves. Non-diffusive models allow for this and we model the move as the difference of two independent mean reverting increasing processes driven by gamma...

A small but ambitious literature uses affine arbitrage-free models to estimate jointly U.S. Treasury term premiums and the term structure of equity risk premiums. Within this approach, this paper identifies the parameter restrictions that are consistent with a simple dividend discount model,...

The theory of two price markets of Cherny and Madan (2010) yields closed forms for bid and ask prices. Defining profits as the difference between the mid quote and the risk neutral expectation and capital as difference between the ask and the bid price one obtains precise expressions for these...

This paper presents an option positioning that allows us to infer forward variances from option portfolios. The forward variances we construct from equity index options help to predict (i) growth in measures of real economic activity, (ii) Treasury bill returns, (iii) stock market returns, and...

We develop a zero beta industry model of growth options to explain the conflicting empirical findings on the relation between stock returns and idiosyncratic return volatility at the firm level. By allowing for the volatility of the underlying idiosyncratic choice variables to exhibit...

This paper estimates how the shape of the implied volatility smile and the size of the variance risk premium relate to parameters of GARCH-type time-series models measuring how conditional volatility responds to return shocks. Markets in which return shocks lead to large increases in conditional...

The relationship between order imbalance, market returns and macroeconomic news is examined in the context of the Australian interest rate futures market. Contemporaneous order imbalance exerts a significant impact on market returns in the expected direction i.e. excess buy (sell) orders drive...