This paper proposes a class of linear signed rank statistics to test for a random walk with unknown drift in the presence of arbitrary forms of conditional heteroscedasticity. The class considered includes analogues of the well-known sign and Wilcoxon test statistics. The exactness of the...

We build and estimate an equilibrium model of the term structure of interest rates based on a recursive utility specification. We contrast it with an arbitrage-free model, where prices of risk are estimated freely without preference constraints. In both models, nominal bond yields are affine...

This paper surveys recent developments in the theory of option pricing. The emphasis is on the interplay between option prices and investors' impatience and their aversion to risk. The traditional view, steeped in the risk-neutral approach to derivative pricing, has been that these preferences...

The authors develop and estimate an equilibrium-based model of the Canadian term structure of interest rates. The proposed model incorporates a vector-autoregression description of key macroeconomic dynamics and links them to those of the term structure, where identifying restrictions are based...

A general method is proposed for the construction of valid simultaneous confidence sets in the context of stationary GARCH models. The proposed method proceeds by numerically inverting the conventional likelihood ratio test. In order to hedge against the risk of a spurious rejection, candidate...

We develop a finite-sample procedure to test the beta-pricing representation of linear factor pricing models that is applicable even if the number of test assets is greater than the length of the time series. Our distribution-free framework leaves open the possibility of unknown forms of...

We propose double bootstrap methods to test the mean-variance efficiency hypothesis when multiple portfolio groupings of the test assets are considered jointly rather than individually. A direct test of the joint null hypothesis may not be possible with standard methods when the total number of...

This paper surveys recent developments in the theory of option pricing. The emphasis is on the interplay between option prices and investors' impatience and their aversion to risk. The traditional view, steeped in the risk-neutral approach to derivative pricing, has been that these preferences...

An iterative (fixed-point) algorithm for the maximum-likelihood estimation of copula-based models that circumvents the need to compute second-order derivatives of the full likelihood function is adapted and examined. The algorithm exploits the structure of copula-based models that yield a...