We study a new class of three-factor affine option pricing models with interdependent volatility dynamics and a … stochastic skewness component unrelated to volatility shocks. These properties are useful in order (i) to model a term structure … of implied volatility skews more consistent with the data and (ii) to capture comovements of short and long term skews …

straddles; second, we estimate the PVR in a Heston (1993) stochastic-volatility model. In both cases, the estimation is … more negative and its term structure is steeper when volatility is high. These findings are inconsistent with calibrations …

volatility on backward-looking term rates …

We present a one-factor local volatility model in discrete time to price and calibrate year-on-year and zero …

implied volatility for different strikes could be based on the information about other -- sometimes more liquid -- financial … instruments in the market. Here we show relevance, but not equivalence, of the information from the market of swaps, (volatility … of swap rates), to the market of bonds, (volatility of bond prices). In particular, we show why the proxy to bond's yield …

actively traded VIX options. Under the model, the evolution of future VIX is completely determined by the volatility function … of forward VIX squared normalized by VIX futures prices. A general volatility function with one- to three-factor models … general volatility function that incorporates mean-reversion and hump effects to test two multifactor models, (iii) finding …

bond returns, while neither, like implied volatility, predicts put returns. These opposite predictability results are … consistent with a stochastic volatility, stochastic jump intensity model, as put premia increase in volatility but decrease in …