We develop and implement a new method for maximum likelihood estimation in closed-form of stochastic volatility models … unobservable volatility state, to an approximate likelihood procedure where the volatility state is replaced by the implied … volatility of a short dated at-the-money option. We find that the approximation results in a negligible loss of accuracy. We …

econometric performance of regime-switching models for interest rate data from the US, Germany and the UK. There is strong … shocks on economic aggregates. Moreover, the implied volatility and drift functions are rich enough to resemble those …

This paper analyzes optimal portfolio choice and consumption with stochastic volatility in incomplete markets. Using … for stocks under stochastic volatility varies strongly with the investor's coefficient of relative risk aversion, but only … preference parameters. This paper also shows that stochastic variation in volatility produces an optimal intertemporal hedging …

forecasting of daily and lower frequency volatility and return distributions. Most procedures for modeling and forecasting … ARCH or stochastic volatility models, which often perform poorly at intraday frequencies. Use of realized volatility … and forecasting. Building on the theory of continuous-time arbitrage-free price processes and the theory of quadratic …

. In addition to standard Wald tests, we formulate Lagrange Multiplier and Distance Metric tests which require estimation … under the non-linear constraints of the null hypotheses. Estimation under the null is achieved by iterating on approximate …

We present theory and evidence that challenges the view that forward premia contain little information regarding …

We develop new procedures for maximum likelihood estimation of affine term structure models with spanned or unspanned … stochastic volatility. Our approach uses linear regression to reduce the dimension of the numerical optimization problem yet it … produces the same estimator as maximizing the likelihood. It improves the numerical behavior of estimation by eliminating …