This paper deals with dynamic term structure models (DTSMs) and proposes a new way to handle the limitation of the classical affine models. In particular, the paper expands the flexibility of the DTSMs by applying generalized Brownian motions with dependent increments as the governing force of...

The paper undertakes a non-parametric analysis of the very high frequency movements in stock market volatility using very finely sampled data on the Samp;P VIX index compiled by the CBOE. The data suggest that stock market volatility is best described as a pure jump process without a continuous...

Motivated by the implications from a stylized self-contained general equilibrium model incorporating the effects of time-varying economic uncertainty, we show that the difference between implied and realized variation, or the variance risk premium, is able to explain a non-trivial fraction of...

We examine the relationship between volatility and past and future returns in high-frequency equity market data. Consistent with a prolonged leverage effect, we find the correlations between absolute high-frequency returns and current and past high-frequency returns to be significantly negative...

In this paper we conduct a formal testing of the possibility of chaotic dynamics in daily exchange rate variables, namely exchange rate returns, volatility and normalized exchange rates. Substantial nonlinear dependence is found in exchange rate returns, even when GARCH-type structure is...

This paper seeks to model the adjustment process in the stock market by a continuous time state space model focusing on input-out relations. The value of the Samp;P 500 is generated as the output of the model with earnings and the interest rate as input. The model is found to fit the data well,...

We evaluate how departure from normality may affect the allocation of assets. A Taylor series expansion of the expected utility allows to focus on certain moments and to compute numerically the optimal portfolio allocation. A decisive advantage of this approach is that it remains operational...

We evaluate how departure from normality may affect the conditional allocation of wealth. The expected utility function is approximated by a fourth-order Taylor expansion that allows for non-normal returns. Market returns are characterized by a joint model that captures the time dependency and...

We present a framework for modeling and estimating dynamics of variance and skewness from time-series data using a maximum likelihood approach assuming that the errors from the mean have a non-central conditional t distribution. We parameterize conditional variance and conditional skewness in an...

The effects of temporal aggregation on asymmetry properties and the kurtosis of returns based on the NYSE composite index are studied. There is less asymmetry in responses to shocks for weekly and monthly frequencies than for the daily frequency. Kurtosis is not smaller for the lower frequencies