We use a comprehensive database of inter-dealer quotes to conduct the first empirical analysis of the dynamics of the swaption cube. Using a model independent approach, we establish a set of stylized facts regarding the cross-sectional and time-series variation of conditional volatility and...

We develop a tractable and flexible stochastic volatility multi-factor model of the term structure of interest rates. It features correlations between innovations to forward rates and volatilities, quasi-analytical prices of zero-coupon bond options and dynamics of the forward rate curve, under...

We conduct a comprehensive analysis of unspanned stochastic volatility in commodity markets in general and the crude-oil market in particular. We present model-free results that strongly suggest the presence of unspanned stochastic volatility in the crude-oil market. We then develop a tractable...

Even though commodity pricing models have been successful in fitting the term structure of futures prices and its dynamics, they do not generate accurate true distributions of spot prices. This paper develops a new approach to calibrate these models using not only observations of oil futures...

Climate change is one of the major global challenges. Mitigating its impact is however bedeviled by free-rider problems and external effects. We thus study the problem of optimal carbon abatement in a dynamic non-cooperative game-theoretical setting involving multiple countries that are open...

This article develops and implements a Real Option approach to value renewable natural resources in the case of Marine Fisheries. The model includes two sources of uncertainty: the resource biomass and the price of fish, and it can be used by fisheries to optimally adapt their harvesting...

In this article we develop a model to analyze patent-protected R&D investment projects when there is (imperfect) competition in the development and marketing of the resulting product. The competitive interactions that occur substantially complicate the solution of the problem since the decision...

By postulating a simple stochastic process for the firm's cash flows in which the drift and the variance of the process depend on the investment policy of the firm, we develop a theoretical model, determine the optimal investment policy and, given this policy, calculate the ratio of the current...

A common European bond would yield a common European Monetary Union risk free rate. We present tentative estimates of this common risk free for the European Monetary Union countries from 2004 to 2009 using variables motivated by a theoretical portfolio selection model. First, we analyze the...

This paper studies the relation between firm value and a firm's growth options. We find strong empirical evidence that (average) Tobin's Q increases with firm-level volatility. The significance mainly comes from R&D firms, which have more growth options than non-R&D firms. By decomposing...