This paper provides an optimal filtering methodology in discretely observed continuous-time jump-diffusion models. Although the filtering problem has received little attention, it is useful for estimating latent states, forecasting volatility and returns, computing model diagnostics such as...

This paper characterizes U.S. consumption dynamics from the perspective of a Bayesian agent who does not know the underlying model structure but learns over time from macroeconomic data. Realistic, high-dimensional macroeconomic learning problems, which entail parameter, model, and state...

A common method for constructing equilibrium price processes in finance is to assume a price process, and then solve for the time-varying expected return. We argue that this method is potentially inconsistent with present value computations. In particular, this approach may imply that the...

We develop an equilibrium pricing model aimed at explaining observed characteristics in equity returns, VIX futures and VIX options data. To derive our model we first specify a general framework based on affine jump-diffusive state-dynamics and representative agent endowed with Duffie-Epstein...