The paper studies estimation of implied volatility and the impact of the choice of the corresponding risk-free rate proxy. We suggest to analyze the implied volatility and the risk-free rate proxy inferred in conjunction from the observed option prices. We formulate and solve an overdefined...

Derivatives, especially equity and volatility options, contain valuable and oftentimes essential information for estimating stochastic volatility models. Absent strong assumptions, their typically highly nonlinear pricing dependence on the state vector prevents or at least severely impedes their...

This paper provides tractable expressions for broad classes of standard transforms for the case of affine jump diffusions. Extending and unifying existing results, these include expressions for exponential, polynomial-log-linear, and polynomial transforms of a state vector in both conditional...

We evaluate how departure from normality may affect the conditional allocation of wealth. The expected utility function is approximated by a forth-order Taylor expansion that allows for non-normal returns. Market returns are characterized by a joint model that captures the time dependency and...

In this paper, we extend the concept of News Impact Curve developed by Engle and Ng (1993) to the higher moments of the multivariate returns' distribution, thereby providing a tool to investigate the impact of shocks on the characteristics of the subsequent distribution. For this purpose, we...