In spite of the popularity of model calibration in finance, empirical researchers have put more emphasis on model estimation than on the equally important goodness-of-fit problem. This is due partly to the ignorance of modelers, and more to the ability of existing statistical tests to detect...

Financial bubbles arise when the underlying assets market price departs from its fundamental value. Unlike other bubble tests that use time series data and assume a reduced-form price process, we infer the existence of bubbles nonparametrically using option price data. Under no-arbitrage and...