narrative restrictions motivated by economic theory and extraneous evidence. We empirically evaluate popular views about the …

We show how to set up a forward rate model in the presence of volatility uncertainty by using the theory of G … absence of arbitrage, known as the drift condition. In contrast to the traditional model, the drift condition consists of two …

exists, arbitrage opportunities must also exist. Conversely, at times when arbitrage profits exist, asset markets are … susceptible to self-fulfilling fluctuations. The tight theoretical connection between price volatility and arbitrage is detectable …

exposed towards domestic option products, they neglect the possibility of engaging in foreign volatility arbitrage. These …