The Chicago Board Options Exchange (CBOE) recently redesigned its widely followed VIX volatility index. While the new VIX is conceptually more appealing than its predecessor, the CBOE's implementation of the index is flawed. Using option prices simulated under typical market conditions, we show...

We identify large discontinuous changes, known as jumps, in daily stock prices and explore the role of jumps in cross-sectional stock return predictability. Our results show that small and illiquid stocks have higher jump returns, to the extent that cross-sectional differences in jumps fully...

In this paper, we identify jumps in U.S. Treasury-bond (T-bond) prices and investigate what causes such unexpected large price changes. In particular, we examine the relative importance of macroeconomic news announcements versus variation in market liquidity in explaining the observed jumps in...

The finding that stocks with high idiosyncratic volatility tend to have low future returns has been dubbed an empirical anomaly in the finance literature. We seek to understand this puzzle by separating the upside volatility associated with positive idiosyncratic returns from the downside risk...

This paper proposes a new approach to exploit the information in high frequency data for the statistical inference of continuous-time affine jump diffusion (AJD) models with latent variables. For this purpose, we construct unbiased estimators of the latent variables and their power functions...

In this paper, we propose a nonparametric estimator of the short rate diffusion process using observations of a panel of yields. The proposed estimator can greatly reduce the bias of the nonparametric estimator proposed in Stanton (1997) that uses a single time series of short rate observations....

In this paper, we propose a unifying affine-quadratic jump-diffusion framework for the term structure dynamics. The model incorporates both stochastic volatility and random jumps in the short rate process. In particular, we extend the existing models by explicitly modeling the jump intensity as...

Recently, the Chicago Board Options Exchange (CBOE) redesigned its widely followed stock market volatility index (VIX). Instead of tracking the Black-Scholes implied volatility of at-the-money options, it is now based on the theoretically superior model-free implied volatility. In this paper, we...

This paper specifies a multivariate stochastic volatility (SV) model for the Samp;P500 index and spot interest rate processes. We first estimate the multivariate SV model via the efficient method of moments (EMM) technique based on observations of underlying state variables, and then investigate...

In this paper, we propose a unifying class of affine-quadratic term structure models (AQTSMs) in the general jump-diffusion framework. Extending existing term structure models, the AQTSMs incorporate random jumps of stochastic intensity in the short rate process. Using information from the...