We propose a class of discrete-time stochastic volatility models that, in a parsimonious way, captures the time-varying higher moments observed in financial series. We build this class of models in order to reach two desirable results. Firstly, we have a recursive procedure for the...

We show how to compute the expectiles of the risk neutral distribution from the prices of European call and put options. Empirical properties of these implicit expectiles are studied on a dataset of closing daily prices of FTSE MIB index options. We introduce the interexpectile difference Δ<sub>τ...

The aim of this paper is to investigate the ability of the Dynamic Variance Gamma model, recently proposed by Bellini and Mercuri (2010), to evaluate option prices on the S&P500 index. We also provide a simple relation between the Dynamic Variance Gamma model and the Vix index. We use this...

This paper estimates a business cycle model with endogenous financial asset supply and ambiguity averse investors. Firms' shareholders choose not only production and investment, but also capital structure and payout policy subject to financial frictions. An increase in uncertainty about profits...

We estimate a production‐based general equilibrium model featuring demand‐ and supply‐side uncertainty and an endogenous term premium. Using term structure and macroeconomic data, we find sizable effects of uncertainty on risk premia and business cycle fluctuations. Both demand‐ and...

This paper models the evolution of monetary policy, the term structure of interest rates and the UK economy across policy regimes. We model the interaction between the macroeconomy and the term structure using a time-varying VAR model augmented with the factors from the yield curve. Our results...