In this paper we propose a stochastic volatility model for crude oil markets that has the particularity to feature a regime-switching price of variance-risk. While preserving tractability, this model allows us to capture the episodes of negative and positive variance risk premium. A two-state...

In this paper, we derive the statistical properties of a general family of Stochastic Volatility (SV) models with leverage effect which capture the dynamic evolution of asymmetric volatility in financial returns. We provide analytical expressions of moments and autocorrelations of...

We develop a new approach to evaluate asset pricing models (APMs) based on Minimum Discrepancy (MD) projections that generalize the Hansen-Jagannathan (HJ, 1997) distance to account for an arbitrary number of moments of asset returns. The Minimum Discrepancy projections correct APMs to become...

We develop a new approach to identify model misspecifications based on Minimum Discrepancy (MD) projections that correct asset pricing models with the use of nonlinear functions of basis assets returns. These nonlinear corrections make our method more effective than the Hansen and Jagannathan...