ceiling limclion, 1II chaos tlteot v. 173. .Sec also

delet ininislic nonlinear

dynamical systems clientele ellects, 11 2 closeness indicator, 177 Cobb-Douglas utility, 326 coefficient luiictions, 351) coinlcgt alion, 257

die let in sunt lute olinleresl tales, 4 19 complete asset markets, 295 compound options, 391 conditional volatility models. .SVv

ARCH models. CAROM models iniuiii lion strength, 513 consistent and uniformly

asymptotically normal (CUAN)

estimators, 358 i onstant-coi relation model, 492 constant-cxpcclcd-relttrn hypothesis,

and vector autoregressive

methods. 281 and volatility tests, 276 (.oiisutnption (lapilal Asset Pricing Model (ССЛРМ), 30 I aggregate consumption and, 316 l-.psfin-Zin-Wril reclusive utility model, 319. See also Epsieiii-Zin-Weil model instrumental variables (IV)

regression, 31 I investor heterogeneity, 317 power utility, 305. See also

lognoi inal asset pricing models substituting consumption out of the model. 320 i onsitmplion growth, 3! 1. 434 consumption ol stockholders and

nonstockholders, 317 i oniinuous-iei ord asyinptotics, 364 lontiatian investment strategies, 76 ronirol variate method, 387 convexity, 400 correlation coefficient, 14 correlation dimension, 478

ten icl.uion integial. 177 cost of capital estimation, 18.3 ( otipon bonds, 390. 101 couvextlv, 100 coup< >n rate, 10 I duration. 103 cllci live dmation, 400 loiward i ales, 408 iiumtmi/alion, 405 loglinear model, 400 Macaidays duration, 403 modilied dotation. 405 pi ice. 401.409 yield to maturity, 101 t ovariatice stalionai ity. 484 Cowles-ones ratio, 35. See also

Random Walk I model Cox. Ingersoll. and Ross model. 430 Cox-Ross option pricing technique, 390. See olso tisk-ncutral option-pricing method cross-autocorrelation, 74, 75. 84. 129.

See also autocorrelation matrices t r< iss-sci t ioual models, 173 (toss-set ttoual testtit tiotis on the

lenn stun lure. 452 (t oss-vahdation. 502 (tilde Monlc (iailo, 380 curse ol dinicnsionalilv, 504

data-snooping, 212, 240, 210, 219,

251. 523 default risk. 400 degrees of Ireedom. 523 Delia of an option. 353. 512 delta method, 51, 540 delta-hedging. 512. 522 derivative set tit ities, 339, 455. .See also lixcd-im omc derivative securities, option pricing loi waid contract, 158 Itiliues t oiutat I, 159 delet ininislic nonlineai dvnainical systems, 173 logislit map. 525

sensilivitv lo iiiili.ll conditions, 173 lent map. 17 I, 170. 525

Baycsian inference, 7 BDS (est, 179 BKKK model,191 benchmark portfolio, 298 Berkeley Options Database, 1(17 Bernoulli distribution, 18 beta. 1Г>Г>. 182, 490 bias

finite-sample bias in long-horizon regressions, 273 bid price, 83 bid-ask bounce, 101, 134 bid-ask spread, 99, Mb, 147

adverse-selection cost component, 103

estimating the effective bid-ask

spread,134 inventory cost component, 103 order-processing cost component, i 103 bilinear model, 471 binary threshold model, 512 binomial tree lor the short-term

interest rate, 442 birth and death options, 391 Blacik-Scholes and Merlon option Ipicing model, 339, 350. See also dption pricing models estimatoV for or, 364 adjusting the Black-Scholes

I formula for predictability, 375 assumptions, 350 Black-Scholes formula, 352. 371,

i 373,519 CAlM, 351

dejlerniiiiislic volatility, 379

estimator for it*. 361, 374. 375

stochastic volatility, 380

implied volatility, 377

option sensitivities, 354 hotrowing constraints, 315 liox-Оох transformation, 140 Box-Pierce Q-statistic, 67 Brock-Dcchcrt-Schcinknian test, 478 Brownian motion, 344

arithmetic, 32, 344

estimator lor or, 364

estimator for a1. 361 geometric, 347 properties, 344 hubbies, 258

bullish vertical spread, 509 Butterfly Kricct, 473

call option, 349 callable bond, 395

Capital Asset Pricing Model (CAPM). 14, 181. Sir also Arbitrage Pricing Theory, Inlet temporal Capital Asset Pricing Model, data-snooping biases, mean-variance efficient-set mathematics, miiltilactot models, sample selectio.n biases

anomalies, 211

applications, 183

Black version, 182, 196

book-market effect conditional. 496

cross-sectional regression tests.

215. Sec also ciTors-in-vat tables hcirroskcdasucily. 208 inlet temporal equilibrium

models, 323 January effect, 100 non-normality, 208 nonsynchronous trading, 85 option pricing, 351 power of tests, 204 price-earnings-ratio elfect, 21 I Shai pe-I.inuier version, 182, 189 si/.e effect. 211.496 size of tests, 203 temporal dependence, 208 unobset validity of the market

portfolio, 213, 216. CAPM. See Capital Asset Pricing Model

catching up with die Joneses, 327, 328. See also habit loi malum models

Cant by distribution, 18

ССЛРМ. See Consumplion Capital Asset Pricing Model

lesling. Sir testing loi

(Iclii inniisiic i к >i H1111 .ii d\n.nnie.i) рпк esses (lilleieiu e si.it ion.it \ jiiik ess. b5, 372. Sir nlsn nnil null piiircss (lilllision function, 356 dis( omit bonds, 391), 397

csihnaling tlie /cio-cuuptin lenn

structure. 109 forward rale. .IlI holding-period 14-iiu ii, .(IS iiiiniunt/alioii, 405 term structure nf inn-rest i.nes. 397

\ield curve, 397

vield spread, 397

vield in niaiiirilv, 397 disiiiuul function, 11(1. .W split

esiiiiiatioii discounted value

of future dividends. 250

иГ die stock price, 255 (list rele-tiine models

nl option pricing, 381

olslot hasiir volalililv, 489 dis( reii/aiion. 383. 385 distribution. Sir asvmpiolic

distribution, icuu us tlividend-prii с raiio. -Mil. 208 dividend-ratio inodel, 203 dividends, I 2. 25 I double boiiotns. .SVv- lei bni( al

analysis down and out options. 391 drill, 31, 350

dual i lit rencv options, 39 I

dual cqiulv opliiins. Ill

durable goods, 320, 332 -. duration, 403. .SVc ij/\n t oup( in bunds T duration of iii >iiii.i* 1111ц. 87 I il\n.iniir hedging sli.ucgy 521 ! dynamic Hading strategics, 352, 391 1 IKnkin t>) ! .Hoi. 300

ellei live (Illl. tliiin. I Of >. Sir nl\n coupon bonds I elleclive spread. 10-

efficiency. .S<r asymptolic efltciciuv i-.Huieni Markets Hypothesis (KMII), .() .Seinislioug-Foriu Efficient v, 22, 3 Siiong-Forni Klliriencv, 22. 30 VVeak-Гогш Ellicicncy, 22. 30 EGARCH model, -1Kb,-IKS Ill. Лее expectations bvpoibesis elasticity, 405 el.rsticily of inlei tempi и al substitution, 305 hyperbolic discounting and. 334 separating risk aversion Irom

intertemporal substitution, 31 the riskless interest rale and. 309 embedding dimension, <l7(i -.MII..V/- Efficient Markers

I lypotlicsis Kpslein-/iii-Weil recursi\-e utility model, .419 consumption-wealth ratio, 321 (Toss-set lional asset pricing

loi inula, 322 equity premium puzzle, 323 factor asset pricing model, 32 I substituting consumption oil! of die model, 320 equity premium puzzle

catching up with the Joneses

model, 32K I !aitscn-agaiinailtan volatility

bound. 302 lognormal asset pricing model with l.pstein-/.in-VVeil utility. 323

lognormal asset pricing model will) power utility, 307 equity repurchases, 250, 2K7 equivalent marlingale measure. 3;Y

3K3, гит

e11 (и s-iu-variables, 21 (i Eider equation, 293, 508. Sir also stochastic discount laclor Cobb-Douglas utility model, .321 ) ratio models ol habit Inn nation. 328

European option, 319

event-study analysis, 149. See also nonparametric tests abnormal return, 150, 151 Arbitrage Pricing Theory. 156 Capital Asset Pricing Model, 156 clustering, 166

constant-mean-return model, 151, 154

cross-sectional models, 173 cumulative abnormal return, IB0 ea rn i ngs-an nouncemen t example, 152

estimation window, 152 event window, 151 event-date uncertainty, 176 factor model, 155 generalized method of moments, 154,174

inference with changing variances, 167

law and economics, 149 legal liability, 149, 179 market model, 151, 155, 158 market-adjusted-return model, 156

uonsynchronous trading, 177

normal return, 151

post-event window, 157

sampling interval, 175

skewness of returns, 172

standardized cumulative abnormal return, 160

lest power, 168 exact factor pricing, 221

interpreting deviations, 242

mean-variance efficient set mathematics, 243

nonrisk-bascd alternatives, 248

optimal orthogonal portfolio, 243, 245, 248

risk-based alternative, 247

Sharpe ratio, 245, 247, 248, 252

tangency portfolio, 245, 247 excess kurtosis 17, 488, 512. See also

kurtosis, returns excess returns, 12, 182, 268, 291 exercise price, 349

exotic securities, 391 expansion of the states, 357 F.XPAR models, 470 expectations hypothesis (EH), 413, 418,419. .See also pure expectations hypothesis, term structure of interest rates empirical evidence, 418 log expectations hypothesi. 432, 437

preferred habitats, 418 yield spreads, 418 expected discounted value. See

discounted value exponential GARCH model, 486, 488

exponential spline, 412

lace value, 396 factor analysis, 234 factor model, 155. See also

multifactor models fair game. .Sec martingale fat tail, 16, 480. See also kurtosis finite-dimensional distributions

(FDDs), 344, 364 Fisher information matrix. See

information matrix fixed-income derivative securities,

Шаск-Scholes formula, 462 Heath-Jarrow-Morton model, 457 Ho-Lee model, 456 homoskedastic single-factor

model, 463 option pricing, 461 term structure of implied volatility,

fixed-income securities, 395 floor function, 114 Kokker-Planck equation, 359 i foreign currency, 5, 382, 386, 39J0 forward equation, 359 i

forward rate, 399, 438, 440. See a\lso term structure of interest rates coupon-bearing term structure, 408

ш 2Г

forward-rale curve, 400, 412 log forward rate, 400, 408 pure expectations hypothesis, 411, 417

yield to maturity, 400 forward trading, 399 fractionally differenced time series,

<><0

Irartiipnally integrated time series. .SVJ fractionally differenced lime series

fundamental asset, 356 fundamental value, 2Г>8, 288

Camilla of an option, 353 <;ЛК(!:!1 models, 483, 480, 187

absolute value GARC! I model, 485 additional explanatory variables, JIH8

BEKK model, 491

conditional markel model, 493

conditional noimormality, 488

constant-correlation model, 492

estimation, 487, 489

excess kuriosis in standardized

residuals, 488 GARCH(1,1) model, 483, 497 GARCH-M model, 494 1GARC1 i model, 484 interest rate volatility, 452 multivariate, 490 persistence, 483 QGARCH model, 407 single-factor GARCH(1,1) model,

stationary distribution, 484 US stock returns, 488 VKCII model, 401 GARCII-iii-incan model, 491 GARCH-M model, 494 Gaussian kernel, 501 Generalized Autoregressive

Conditionally I lelcroskcdaslic models. 483. See aim (.AR( .11 models

Generalized Error Distribution, 489

generalized inverse of a matrix, 244, 245

Generalized Method of Moments (GMM), 174, 208, 222, .314, 350, 448, 449, 455, 489, 494, 532 asymptotic distribution, 533 asymptotic variance, 533 Newey-West estimator, 535 stochastic differential equation, 359

weighting matrix, 533 geometric brownian motion, 383. See alsa brownian motion risk-neutralized process, 355, 370 GMM. Лес Generalized Method ol

Moments (ioldmau-Sosin-Galto option pi it e

formula, 385, 304 Cordon growth model, 250

dynamic Gordon growth model, 203

government spending in the utility

function, 320 Granger-causality, 01 Greeks, 353

habit formation, 327 Abel model, 327 Campbcll-Cochrane model, 330 Constantinides model, 330 external-habit models, 327 internal-habit models, 327 difference models, 320 ralio models, 327.

Hamilton Markov-switching model, 472

Hansens test of overidenlilying

restrictions, 531 I laiiscn-agannalhan volatility hound, 200. See eil.w stochastic discount factor benchmark portfolio, 298 Equity Premium Puzzle, 302 geometric interpretation, 298 lognormal assel pricing model with power utility and, 309 market frictions and, 315

maximum tin relation portfolio, 298

me,in-vai iatti с clliciciicy, 208 nonnegativity constraints, 301 I Icaih-jarrow-Moiioii model, 457.

See atsu prit iug lixed-iucome

derivative securities I leaviside activation function, 513 hedge portfolios, 322 hedge ratio, 352, 353. See also

di lla-hcdgiug heterogeneous investors, 318, 335 hiiii oskedaslicily- and

autocorrelation-consistent

standard errors, 130, 174, 208,

1 ir leu iskid.isiiiitv-ci insistent

esiiiu.itiiis. 51 bidden layer. 5 I I bill li-ii units, 511 itist.it ii al volatility, 378 I lo-l.ee model, 450, 104. Sic alsa

pricing lixeil-iuconie derivative

securities holding-period return, 397 honinskcdaslic single-factor

lei m-structiu e model, 429, 452, 157

I lotellitig V- sialism . 232

I Isieh test of nonlinearily. 475

I lull and White stochastic volatility

model, 380 I hitsl-Maiidelbrot rescaled range

statistic. See rescaled range

statistic hspct basis luiulions. 517 hyperbolic discounting, 33-1

idiosyncratic risk, 72. 02, 221, 318

ICARCll model, 484

IID. See independent antl identical

distribution inununi/alion, 105 implied volatility, 377 importance sampling, 388 ini ouii clicci, 321. See alst)

substitution cllcct

income risk. 318 incomplete inaikels. 200. 392 inilepeuilenl and identical

distribution (III)), 15, 33, 475 indexed bonds, 395 indirect slope estimator, 505 inlinilesiiual generator, .300 inhumation matrix, 101, 358, 538 inloi maiitin-mai! ix equality, 530 input layer. 513 insttinneut.il v.iti.ibles (IV)

regression. 31 1.313, 404, 527,

instruments, 4 17, 528 integrated GARCH model. 481 interest rati. See coupon bonds, discount bonds, forwaid rate, inlet csl-i ale forecasts, shot l-lcrin interest rale, let m stt itctiuc of inlerest rates, yield spread, riskless iutetesl rate interest-rale forecasts, 418 internal i.ile of return, 401 iuierpol.ition problems, 510 liiterleinpor.il Capilal Asset Pricing Model (ICAPM), 219, 221, 291. .SVv uImi (;,i[>iial Asset Prii ing Model, iniillifai lot models intertemporal marginal ratiof

substitution, 294 inlei temporal substitution cllcct, 331. .Sit aha elasticity of iineitemporal substitution investor heterogeneity and, 317 irregularly sampled dala, 303 ISE estimator, 505 isoelastic prelii enccs, See power utility

ho process. 3 18. See tilui Ihowniaii minion, stochastic differential equation IliVs l.emiii.i. 3-18, 351 IV regression. Лес insliiiiiient.il v,u iables t egi essioit

j.uuiaiv ellet I, 100 Joseph Ills. 1. 59