This paper documents law of one price violations in equity volatility markets. While tightly linked by no …

-affine volatility dynamics. We use extensive empirical data sets to study how infinite-activity Variance Gamma and Normal Inverse … Gaussian jumps with affine and non-affine volatility dynamics improve goodness of fit and option pricing performance. With …

-dependent volatility as the limit of a discrete-time GARCH model. In particular, the continuous-time model is the limit of a discrete …-time GARCH model of Heston and Nandi (1997) that allows asymmetry between returns and volatility. For the continuous-time model …

innovations in the level factor to explain the volatility of long-term bond returns. The model also implies that excess bond … predictability of excess returns on long-term bonds. Modeling this requires sufficient volatility and persistence in the price of … stylized facts. In a decomposition of long-term bond returns we find that the expectations component from the level factor is …

innovations in the level factor to explain the volatility of long-term bond returns. The model also implies that excess bond … predictability of excess returns on long-term bonds. Modeling this requires sufficient volatility and persistence in the price of … stylized facts. In a decomposition of long-term bond returns we find that the expectations component from the level factor is …

terms of a single perpetual-bond equivalent issue, we define leverage, show the stochastic nature of equity volatility and … the leverage parameter L and make use of the univariate normal distribution function, are consistent with the volatility …

We nest multiple volatility components, fat tails and a U-shaped pricing kernel in a single option model and compare … two-factor models. A second volatility component improves the option fit by 9% on average. Fat tails improve option fit by …

average absolute difference between historical and implied volatility increases with stock illiquidity. This pattern …

volatility, volatility-of-volatility, and Merton-jump diffusion are derived …