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A Non-Parametric Dimension Test of the Term Structure
(University of the Basque Country, Department of Foundations of Economic Analysis II, 2002)
In an economy with multiple sources of risk, the short-term interest rate does not capture all the information that determines the conditional distribution of bond yields. This is also true for path-dependent term structure ...
Smiling under stochastic volatility
(University of the Basque Country, Department of Foundations of Economic Analysis II, 2002)
This paper studies the behavior of the implied volatility function (smile) when the true distribution of the underlying asset is consistent with the stochastic volatility model proposed by Heston (1993). The main result ...
Autorregresive conditional volatility, skewness and kurtosis
(University of the Basque Country, Department of Foundations of Economic Analysis II, 2002)
This paper proposes a GARCH-type model allowing for time-varying volatility, skewness and kurtosis. The model is estimated assuming a Gram-Charlier series expansion of the normal density function for the error term, which ...
Understanding the ex-ante cost of liquidity in the limit order book: A note
(University of the Basque Country, Department of Foundations of Economic Analysis II, 2002-01)
This paper estimates a new measure of liquidity costs in a market driven by orders. It represents thecost of simultaneously buying and selling a given amount of shares, and it is given by a single measure of ex-ante liquidity ...
Asset pricing and systematic liquidity risk: an empirical investigation of the Spanish stock market
(University of the Basque Country, Department of Foundations of Economic Analysis II, 2002)
Systematic liquidity shocks should affect the optimal behavior of agents in financial
markets. Indeed, fluctuations in various measures of liquidity are significantly
correlated across common stocks. Accordingly, this ...
An empirical comparison of the performance of alternative option pricing models
(University of the Basque Country, Department of Foundations of Economic Analysis II, 2002)
This paper presents a comparison of alternative option pricing models based neither on jump-diffusion nor stochastic volatility data generating processes. We assume either a smooth volatility function of some previously ...