This paper develops a general stochastic framework and an equilibrium asset pricing model that make clear how attitudes towards intertemporal substitution and risk matter for option pricing. In particular, we show under which statistical conditions option pricing formulas are not...

A number of information-theoretic alternatives to GMM have recently been proposed in the literature. For practical use and general interpretation, the main drawback of these alternatives, particularly in the case of conditional moment restrictions, is that they rely on high dimensional convex...

An inference method, called latent backfitting is proposed. It appears well suited for econometric models where the structural relationships of interest define the observed endogenous variables as a known function of unobserved state variables and unknown parameters. This nonlinear state space...

This paper assesses the empirical performance of an intertemporal option pricing model with latent variables which generalizes the Hull-White stochastic volatility formula. Using this generalized formula in an ad-hoc fashion to extract two implicit parameters and forecast next day S&P 500 option...

This paper addresses the issue on estimating semiparametric time series models specified by their conditional mean and conditional variance. We stress the importance of using joint restrictions on the mean and variance. This leads to take into account the covariance between the mean and the...

This paper provides a semiparametric framework for modelling multivariate conditional heteroskedasticity. First, we show that stochastic volatility factor models with possibly cross-correlated disturbances cannot be identified from returns conditional variance structure only, except when strong...

In this survey, we review econometric models for conducting statistical inference on option price data. We limit our review to European options on a stock index as well as to statistical methods which have been specifically developped for options. Emphasis is put on the synthesis of the various...

In the standard consumption capital asset pricing model (CCAPM), the curvature of the investor's utility function captures two aspects of preferences: as the concavity of the function increases so does his aversion to risk as well as his desire to smooth consumption intertemporally. This...

In this paper, we consider temporal aggregation of volatility models. We introduce a semiparametric class of volatility models termed square-root stochastic autoregressive volatility (SR-SARV) and characterized by an autoregressive dynamic of the stochastic variance. Our class encompasses the...

In this paper, we survey some of the recent nonparametric estimation methods which were developed to price derivative contracts. We focus on equity options and start with a so-called model-free approach which incolves very little financial theory. Next we discuss nonparametric and...