In this paper we show that a two-factor constant volatility model provides an adequate description of the dynamics and shape of the German term structure of interest rates from 1972 up to 1998.

This paper shows how one can compute option prices from a Bayesian inference view point, using a GARCH model for the dynamics of the the volatility of the underlying asset. The proposed evaluation of an option is the predictive expectation of its payoff function. The predictive distribution of...

This paper has estimated, using a non-parametric method, the distribution function of expected three-month interbank rates, using data on call options on the MIBOR-90 future. The evolution over time of this distribution function has enabled the effects of movements in the Banco de Espana...

We introduce a class of communication equilibria, which we call self-fulfilling mechanisms, and show that they provide a game-theoretic foundation to rational expectations equilibria.

This paper has estimated, using a non-parametric method, the distribution function of expected three-month interbank rates, using data on call options on the MIBOR-90 future. The evolution over time of this distribution function has enabled the effects of movements in the Banco de España...