This paper investigates the propagation of instability through key asset markets of the US financial system - equity, real estate, banking and treasury - between 1/3/2000 and 12/26/2014. For this purpose, we develop an identification method to uncover characteristic financial market...

Portfolio sorting is ubiquitous in the empirical finance literature, where it has been widely used to identify pricing anomalies in different asset classes. Despite the popularity of portfolio sorting, little attention has been paid to the statistical properties of the procedure or to the...

Forecasting-volatility models typically rely on either daily or high frequency (HF) data and the choice between these two categories is not obvious. In particular, the latter allows to treat volatility as observable but they suffer of many limitations. HF data feature microstructure problem,...

Volatility is a central tenet of financial markets, impacting a wide range of investors’ daily activities, including risk management, portfolio construction and option pricing. To improve their investment decisions, investors are spending considerable time and effort on finding new ways to...

This paper studies the continuous-time dynamics of VIX with stochastic volatility and jumps in VIX and volatility. Built on the general parametric affine model with stochastic volatility and jumps in the logarithm of VIX, we derive a linear relationship between the stochastic volatility factor...

Estimating trading costs in the absence of recorded data is a problem that continues to puzzle financial market researchers. We address this challenge by introducing two low frequency bid-ask spread estimators using daily high and low transaction prices. The range of mid-prices is an increasing...