Related papers: Integrated volatility and round-off error
Marginal expected shortfall is unquestionably one of the most popular systemic risk measures. Studying its extreme behaviour is particularly relevant for risk protection against severe global financial market downturns. In this context,…
In this paper, we propose a multiphysics finite element method for a nonlinear poroelasticity model. To better describe the processes of deformation and diffusion, we firstly reformulate the nonlinear fluid-solid coupling problem into a…
We derive a closed form portfolio optimization rule for an investor who is diffident about mean return and volatility estimates, and has a CRRA utility. The novelty is that confidence is here represented using ellipsoidal uncertainty sets…
This work develops change-point methods for statistics of high-frequency data. The main interest is in the volatility of an It\^{o} semi-martingale, the latter being discretely observed over a fixed time horizon. We construct a…
This paper is concerned with nonlinear filtering of the coefficients in asset price models with stochastic volatility. More specifically, we assume that the asset price process $S=(S_{t})_{t\geq0}$ is given by \[ dS_{t}=m(\theta_{t})S_{t}…
Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior…
In the framework of risk management, for the study of the sensitivity of pricing and hedging in stochastic financial models to changes of parameters and to perturbations of the stock prices, we propose an error calculus which is an…
We introduce a class of randomly time-changed fast mean-reverting stochastic volatility models and, using spectral theory and singular perturbation techniques, we derive an approximation for the prices of European options in this setting.…
In this paper, we show how to estimate the asymptotic (conditional) covariance matrix, which appears in central limit theorems in high-frequency estimation of asset return volatility. We provide a recipe for the estimation of this matrix by…
In this paper we study the short-time behavior of the at-the-money implied volatility for European and arithmetic Asian call options with fixed strike price. The asset price is assumed to follow the Bachelier model with a general stochastic…
This paper introduces one new multivariate volatility model that can accommodate an appropriately defined network structure based on low-frequency and high-frequency data. The model reduces the number of unknown parameters and the…
Several novel statistical methods have been developed to estimate large integrated volatility matrices based on high-frequency financial data. To investigate their asymptotic behaviors, they require a sub-Gaussian or finite high-order…
We suggest that the broad distribution of time scales in financial markets could be a crucial ingredient to reproduce realistic price dynamics in stylised Agent-Based Models. We propose a fractional reaction-diffusion model for the dynamics…
In this paper, we propose a price staleness factor model that accounts for pervasive market friction across assets and incorporates relevant covariates. Using large-panel high-frequency data, we derive the maximum likelihood estimators of…
This paper investigates the hedging effectiveness of a dynamic moving window OLS hedging model, formed using wavelet decomposed time-series. The wavelet transform is applied to calculate the appropriate dynamic minimum-variance hedge ratio…
Discrete diffusion models have gained increasing attention for their ability to model complex distributions with tractable sampling and inference. However, the error analysis for discrete diffusion models remains less well-understood. In…
This paper develops a multifidelity method that enables estimation of failure probabilities for expensive-to-evaluate models via information fusion and importance sampling. The presented general fusion method combines multiple probability…
While a substantial literature on structural break change point analysis exists for univariate time series, research on large panel data models has not been as extensive. In this paper, a novel method for estimating panel models with…
We consider the problem of testing the parametric form of the volatility for high frequency data. It is demonstrated that in the presence of microstructure noise commonly used tests do not keep the preassigned level and are inconsistent.…
Using Malliavin Calculus techniques, we derive closed-form expressions for the at-the-money behaviour of the forward implied volatility, its skew and its curvature, in general Markovian stochastic volatility models with continuous paths.