Due to the presence of stochastic volatility dynamics, the Fong-Vasicek short rate model is more complex but also more realistic than the classical Vasicek version. To enhance the numerical tractability of the Fong-Vasicek model for the calculation of bond option prices, we suggest the use of...

This paper studies the relationship between the cross section of stock returns and firm specific jump risk. Using option data, we estimate various option-based time-series. Sorting firms according to their firm specific jump risk, we find that this risk is priced for small stocks. Furthermore,...

Stocks are exposed to the risk of sudden downward jumps. Additionally, a crash in one stock (or index) can increase the risk of crashes in other stocks (or indices). Our paper explicitly takes this contagion risk into account and studies its impact on the portfolio decision of a CRRA investor...