In this paper, we investigate the importance of different loss functions when estimating and evaluating option pricing models. Our analysis shows that it is important to take into account parameter uncertainty, since this leads to uncertainty in the predicted option price. We illustrate the...

This paper presents a framework based on correlation analysis to test for contagion during the episode of financial turmoil surrounding the Asian crisis. In particular, we calculate conditional and unconditional correlation coefficients for 15 countries. We advocate the use of synchronous...

In this paper we investigate the ability of different models to produce useful VaR-estimates for exchange rate positions. We make a distinction between models that include sophisticated tail properties and models that do not. The former type of models often leads to too extreme VaR-estimates,...

This paper empirically investigates a method to quantify volatility using the information content of index options. We derive the parameters of a GARCH option pricing model from the term structure of the observed market smile of DAX 30 index. We find the EGARCH option pricing model (Duan, 1995)...

In this paper we investigate the ability of different models to produce useful VaR-estimates for exchange rate positions. We make a distinction between models that include sophisticated tail properties and models that do not. The former type of models often leads to too extreme VaR-estimates,...

In this paper, we examine the validity of hedonic models for estimating heterogeneous assets returns. We look into the art markets, and show that the returns on hedonic indices strictly depend on the specifications of the model. Different sets of variables lead to different returns. This means...

This paper reviews recent trends in alternative investments and their implications as the background for the Special Issue of the Journal of Empirical Finance on Alternative Investments. The historically low bond yields have brought new challenges to many investors in their search for yield, and...

Previous studies on the cross-sectional market moments' risk premia find significantly negative risk premia for the market volatility and the market skewness risks and a positive premium for the market kurtosis risk. However, a significantly negative price of risk for the market skewness and a...