Related papers: Time-Changed Fast Mean-Reverting Stochastic Volati…
We study the dependence of volatility on the stock price in the stochastic volatility framework on the example of the Heston model. To be more specific, we consider the conditional expectation of variance (square of volatility) under fixed…
To improve the efficient frontier of the classical mean-variance model in continuous time, we propose a varying terminal time mean-variance model with a constraint on the mean value of the portfolio asset, which moves with the varying…
Numerous empirical proofs indicate the adequacy of the time discrete auto-regressive stochastic volatility models introduced by Taylor in the description of the log-returns of financial assets. The pricing and hedging of contingent products…
We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…
This paper builds a model of high-frequency equity returns by separately modeling the dynamics of trade-time returns and trade arrivals. Our main contributions are threefold. First, we characterize the distributional behavior of…
Many economic variables feature changes in their conditional mean and volatility, and Time Varying Vector Autoregressive Models are often used to handle such complexity in the data. Unfortunately, when the number of series grows, they…
We introduce a class of stochastic volatility models $(X_t)_{t \geq 0}$ for which the absolute moments of the increments exhibit anomalous scaling: $\E\left(|X_{t+h} - X_t|^q \right)$ scales as $h^{q/2}$ for $q < q^*$, but as $h^{A(q)}$…
In this paper new analytical and numerical approaches to valuating path-dependent options of European type have been developed. The model of stochastic volatility as a basic model has been chosen. For European options we could improve the…
We present an option pricing formula for European options in a stochastic volatility model. In particular, the volatility process is defined using a fractional integral of a diffusion process and both the stock price and the volatility…
In the present paper we present a finite element approach for option pricing in the framework of a well-known stochastic volatility model with jumps, the Bates model. In this model the asset log-returns are assumed to follow a…
Agents' heterogeneity is recognized as a driver mechanism for the persistence of financial volatility. We focus on the multiplicity of investment strategies' horizons, we embed this concept in a continuous time stochastic volatility…
Monitoring downside risk and upside risk to the key macroeconomic indicators is critical for effective policymaking aimed at maintaining economic stability. In this paper I propose a parametric framework for modelling and forecasting…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
Most models for barrier pricing are designed to let a market maker tune the model-implied covariance between moves in the asset spot price and moves in the implied volatility skew. This is often implemented with a local…
The use of factor stochastic volatility models requires choosing the number of latent factors used to describe the dynamics of the financial returns process; however, empirical evidence suggests that the number and makeup of pertinent…
We propose a pairs trading model that incorporates a time-varying volatility of the Constant Elasticity of Variance type. Our approach is based on stochastic control techniques; given a fixed time horizon and a portfolio of two…
In this paper, a pricing formula for volatility swaps is delivered when the underlying asset follows the stochastic volatility model with jumps and stochastic intensity. By using Feynman-Kac theorem, a partial integral differential equation…
We develop a stochastic volatility framework for modeling multiple currencies based on CBI-time-changed L\'evy processes. The proposed framework captures the typical risk characteristics of FX markets and is coherent with the symmetries of…
We consider a discrete-time approximation of paths of an Ornstein--Uhlenbeck process as a mean for estimation of a price of European call option in the model of financial market with stochastic volatility. The Euler--Maruyama approximation…
A stochastic model for pure-jump diffusion (the compound renewal process) can be used as a zero-order approximation and as a phenomenological description of tick-by-tick price fluctuations. This leads to an exact and explicit general…