We explore the effects of fat tails on the equilibrium implications of the long run risks model of asset pricing by introducing innovations with dampened power law to consumption and dividends growth processes. We estimate the structural parameters of the proposed model by maximum likelihood. We...

We propose a new model of volatility by allowing for a cascading structure of volatility components. The cascading feature is achieved by introducing an increasing structure to the speed of mean reversion. It allows us to add as many components as desired with no additional parameter,...

We investigate possible presence of time-varying risk premia in forward pound, yen,and Euro monthly exchange rates versus the US dollar 3 over the last two decades. We study this issue using regression techniques and separately using a signal plus noise model. Our models account for time-varying...