This paper studies the asset pricing implications of Bayesian learning about the parameters, states, and models determining aggregate consumption dynamics. Our approach is empirical and focuses on the quantitative implications of learning in real-time using post World War II consumption data. We...

Parameter learning strongly amplifies the impact of macro shocks on marginal utility when the representative agent has a preference for early resolution of uncertainty. This occurs as rational belief updating generates subjective long-run consumption risks. We consider general equilibrium models...

This paper examines continuous-time stochastic volatility models incorporating jumps in returns and volatility. We develop a likelihood-based estimation strategy and provide estimates of parameters, spot volatility, jump times, and jump sizes using S&P 500 and Nasdaq 100 index returns. Estimates...

This paper examines a class of continuous-time models incorporating jumps in returns and volatility, in addition to diffusive stochastic volatility. We develop a likelihood-based estimation strategy and provide estimates of model parameters, spot volatility, jump times and jump sizes using both...

type="main" <title type="main">ABSTRACT</title> <p>This paper finds statistically and economically significant out-of-sample portfolio benefits for an investor who uses models of return predictability when forming optimal portfolios. Investors must account for estimation risk, and incorporate an ensemble of important...</p>

Previous research concludes that options are mispriced based on the high average returns, CAPM alphas, and Sharpe ratios of various put selling strategies. One criticism of these conclusions is that these benchmarks are ill suited to handle the extreme statistical nature of option returns...

This paper studies the returns from investing in index options. Previous research documents significant average option returns, large CAPM alphas, and high Sharpe ratios, and concludes that put options are mispriced. We propose an alternative approach to evaluate the significance of option...

Interest rate swap pricing theory traditionally views swaps as a portfolio of forward contracts with net swap payments discounted at LIBOR rates. In practice, the use of marking-to-market and collateralization questions this view as they introduce intermediate cash flows and alter credit...