enough to accommodate the behavior of both caps and swaptions well. For the joint estimation we use a comprehensive dataset …We propose a novel time-changed L évy LIBOR market model for the joint pricing of caps and swaptions. The time changes … are split into three components. The first component allows us to match the volatility term structure, the second …

estimated using data on inflation swap rates, as well as nominal yields and survey forecasts of inflation. The volatility state … representing the short-term real interest rate, expected inflation, inflation's central tendency, and four volatility factors that … variables fully determine bonds' time-varying risk premia and allow for stochastic volatility and correlation between bond …

We identify a global risk factor in the cross-section of implied volatility returns in currency markets. A zero …-cost strategy that buys forward volatility agreements with downward sloping implied volatility curves and sells those with upward … slopes - volatility carry strategy - generates significant excess returns. The covariation with volatility carry returns …

I show that volatility risk of the dollar factor --- an equally weighted basket of developed U.S. dollar exchange rates … --- carries a significant risk premium and that it is priced in the cross-section of currency volatility excess returns. The … dollar factor volatility risk premium is negative on average with an upward sloping and concave term structure. Consistent …

This paper studies the intertemporal relation between U.S. volatility risk and international equity risk premia. We … show that a common volatility risk factor constructed from the option-implied U.S. forward variances positively and … robust to the inclusion of existing domestic and U.S. predictors and alternative U.S. volatility risk proxies. The …

-run risks model of Bansal and Yaron (2004) by allowing both a long- and a short-run volatility components in the evolution of … economic fundamentals. With this extension, the new model not only is consistent with the volatility literature that the stock … market is driven by two, rather than one, volatility factors, but also provides significant improvements in fitting various …