With increasing appreciation of the fact that stock return variance is stochastic and variance risk is heavily priced, the industry has created a series of variance derivative products to span variance risk. The variance swap contract is the most actively traded of these products. It pays at...

The challenge of international term structure models is to simultaneously account for the properties of interest rate term structures and foreign exchange rates within an arbitrage-free framework. We extend the quadratic term structure models proposed in Leippold and Wu (2002) to multiple...

The term structure of American interest rates is filtered to reduce the influence of cross correlations and auto correlations on its factors. A three-factor model is fitted to the filtered data. Contrary to most studies of the term structure on monthly data, performing statistical tests we...

We develop a continuous time general equilibrium model for the term structure of interest rates where economic agents are averse to model uncertainty and consider the possibility of a misspecified dynamic model for the latent risk factors driving interest rates. Aversion to model uncertainty is...

This paper proposes a moment-matching method for approximating vector autoregressions by finite-state Markov chains. The Markov chain is constructed by targeting the conditional moments of the underlying continuous process. The proposed method is more robust to the number of discrete values and...

Using futures data for the period 1990 - 2008, this paper finds evidence that expansionary monetary policy surprises tend to increase crude and heating oil prices, and contractionary monetary policy shocks increase gold and platinum prices. Our analysis uncovers substantial heterogeneity in the...

This paper proposes a robust approach to hedging and pricing in the presence of market imperfections such as market incompleteness and frictions. The generality of this framework allows us to conduct an in-depth theoretical analysis of hedging strategies for a wide family of risk measures and...

We propose a new method for pricing options based on GARCH models with filtered historical innovations. In an incomplete market framework we allow for different distributions of the historical and the pricing return dynamics enhancing the model flexibility to fit market option prices. An...

We propose a simple class of semiparametric multivariate GARCH models, allowing for asymmetric volatilities and time-varying conditional correlations. Estimates for time-varying conditional correlations are constructed by means of a convex combination of estimates for averaged correlations...

We present a multivariate, non-parametric technique for constructing reliable daily VaR predictions for individual assets belonging to a common equity market segment, which takes also into account the possible dependence structure between the assets and is still computationally feasible in large...