We present an economically motivated two-factor term structure model that generalizes existing stochastic mean term structure models. By allowing a certain parameter to acquire dynamical behavior we extend the two-factor model to obtain a nonlinear three-factor model that is shown, in a...

Evidence from the financial markets suggests that empirical returns distributions, both historical and implied, do not arise from diffusion processes. A growing literature models the returns process as a Levy process, finding a number of explicit formulae for the values of some derivatives in...

The general aim of a contingent valuation survey is to elicit the willingness to pay (WTP) of respondents for some (public) commodity without a clear market price. This could be a program to protect some environmental resource or, as in our application, the access to a recreational area of...

Particle filters are regularly used to obtain the filter distributions associated with state-space financial time series. The most common use today is the auxiliary particle filter (APF) method in conjunction with a first-order Taylor expansion of the log-likelihood. We argue that for series...

We introduce a model of a local public goods economy with a continuum of agents and jurisdictions with finite but unbounded populations, where the set of possible projects for each jurisdiction/club is unrestricted in size. Under boundedness of per capita payoffs, which simply ensures that equal...

The main objective of this paper is to propose a feasible, model free estimator of the predictive density of integrated volatility. In this sense, we extend recent papers by Andersen et a]. [Andersen, T.G., Bollerslev,T., Diebold, FX, Labys, P., 2003. Modelling and forecasting realized...

Continuous-time stochastic volatility models are becoming an increasingly popular way to describe moderate and high-frequency financial data. Barndorff-Nielsen and Shephard (2001a) proposed a class of models where the volatility behaves according to an Ornstein-Uhlenbeck (OU) process, driven by...

This article makes two contributions. First, we outline a simple simulation-based framework for constructing conditional distributions for multifactor and multidimensional diffusion processes, for the case where the functional form of the conditional density is unknown. The distributions can be...

This article introduces a new model for transaction prices in the presence of market microstructure noise in order to study the properties of the price process on two different time scales, namely, transaction time where prices are sampled with every transaction and tick time where prices are...

In an effort to improve the small sample properties of generalized method of moments (GMM) estimators, a number of alternative estimators have been suggested. These include empirical likelihood (EL), continuous updating, and exponential tilting estimators. We show that these estimators share a...