Bikbov, Ruslan; Chernov, Mikhail - In: Management Science 55 (2009) 8, pp. 1292-1305
Unspanned stochastic volatility (USV) refers to the inability of bonds to replicate volatility-sensitive derivative securities. Affine term structure models require special restrictions on the parameters to exhibit USV. We use a joint Eurodollar futures and options data set to estimate affine...