Derivative contracts on multiple foreign exchange rates must be priced to avoid arbitrage by contracts on the cross-rates. Given the triangle of smiles for two underlyings and their cross, we provide an analytic formula for a joint probability density such that all three vanilla markets are...

The spectral density estimation has had significant importance in empirical research in the past decades, especially in the field of Heteroskedasticity and Autocorrelation Consistent (HAC) covariance matrix estimation and in the random walk theory. The aim of this paper is to find a universal...

To compare distributions of ordinal data such as individuals' responses on Likert-type scale variables summarizing subjective well-being, we should not apply the toolbox of methods developed for cardinal variables such as income. Instead we should use an analogous toolbox which takes account of...

This paper proposes a new reduced-form model for the pricing of VIX derivatives that includes an independent stochastic jump intensity factor and co-jumps in the level and variance of VIX, while allowing the mean of VIX variance to be time-varying. I t the model to daily prices of futures and...

We estimate and test for multiple structural breaks in distribution with unknown break dates via a characteristic function approach. By minimizing the sum of squared generalized residuals, we can consistently estimate the break fractions. We propose a sup-F type test for structural breaks in...

A simple expression for the characteristic function of the lognormal distribution has eluded researchers. This is useful for computing the sum of lognormal variables, either with each other or with other statistical variables. In this paper, we provide a simple formula for the characteristic...

We analyze the effect of skewness in a simple two-asset framework. Returns follow the split bivariate normal distribution, which is a combination of bivariate normal distributions with different standard deviations. We show that expected returns deviate from the CAPM in equilibrium if assets...

This paper constructs individual-specific density forecasts for a panel of firms or households using a dynamic linear model with common and heterogeneous coefficients and cross-sectional heteroskedasticity. The panel considered in this paper features a large cross-sectional dimension N but...

Several diagonal-based tail dependence indices have been suggested in the literature to quantify tail dependence. They have well-developed statistical inference theories but tend to underestimate tail dependence. For those problems when assessing the maximal strength of dependence is important...