diffusive volatility and squared jump variation. We use this result to develop a new option valuation model in which the … underlying asset price exhibits volatility and jump intensity dynamics. The volatility and jump intensity dynamics in the model … are directly driven by model-free empirical measures of diffusive volatility and jump variation. Because the empirical …

We study a new class of three-factor affine option pricing models with interdependent volatility dynamics and a … stochastic skewness component unrelated to volatility shocks. These properties are useful in order (i) to model a term structure … of implied volatility skews more consistent with the data and (ii) to capture comovements of short and long term skews …

I propose an affine discrete-time model, called Vector Autoregressive Gamma with volatility Bursts (VARG-B) in which … volatility experiences, in addition to frequent and small changes, periods of sudden and extreme movements generated by a latent …

We nest multiple volatility components, fat tails and a U-shaped pricing kernel in a single option model and compare … two-factor models. A second volatility component improves the option fit by 9% on average. Fat tails improve option fit by …

I propose an affine discrete-time model, called Vector Autoregressive Gamma with volatility Bursts (VARG-B) in which … volatility experiences, in addition to frequent and small changes, periods of sudden and extreme movements generated by a latent …

interest rate derivatives when the volatility of the short rate follows a GARCH process that can be correlated with the level …, yield curve options, etc. The advantage of our discrete-time model over continuous-time stochastic volatility models is that … volatility is an observable function of the history of the spot rate and is easily (and exactly) filtered from the discrete …

VIX options and target volatility options (TVOs) under affine GARCH models based on Gaussian and Inverse Gaussian …