We conduct an extensive empirical analysis of VIX derivative valuation models over the 2004-2007 bull market and the subsequent financial crisis. We show that existing models yield large distortions during the crisis because of their restrictive volatility mean reverting assumptions. We propose...

We show that the distribution of any portfolio whose components jointly follow a location-scale mixture of normals can be characterised solely by its mean, variance and skewness. Under this distributional assumption, we derive the mean-varianceskewness frontier in closed form, and show that it...

We derive specification tests for the null hypotheses of multivariate normal and Student t innovations using the Generalised Hyperbolic distribution as our alternative hypothesis. In both cases, we decompose the corresponding Lagrange Multiplier-type tests into skewness and kurtosis components,...

We derive the statistical properties of the SNP densities of Gallant and Nychka (1987). We show that these densities, which are always positive, are more general than the truncated Gram-Charlier expansions of Jondeau and Rochinger (2001), who impose parameter restrictions to ensure positivity....

We derive the statistical properties of the SNP densities of Gallant and Nychka (1987). Weshow that these densities, which are always positive, are more flexible than truncated Gram-Charlier expansions with positivity restrictions. We use the SNP densities for financialderivatives valuation. We...