Related papers: How Unlucky is 25-Sigma?
Using Jeff Holman's comments in Quantitative Finance to illustrate 4 critical errors students should learn to avoid: 1) Mistaking tails (4th moment) for volatility (2nd moment), 2) Missing Jensen's Inequality, 3) Analyzing the hedging…
We investigate quantitatively the so-called leverage effect, which corresponds to a negative correlation between past returns and future volatility. For individual stocks, this correlation is moderate and decays exponentially over 50 days,…
Classic stochastic volatility models assume volatility is unobservable. We use the Volatility Index: S&P 500 VIX to observe it, to easier fit the model. We apply it to corporate bonds. We fit autoregression for corporate rates and for risk…
During any unique crisis, panic sell-off leads to a massive stock market crash that may continue for more than a day, termed as mainshock. The effect of a mainshock in the form of aftershocks can be felt throughout the recovery phase of…
Understanding stock market instability is a key question in financial management as practitioners seek to forecast breakdowns in asset co-movements which expose portfolios to rapid and devastating collapses in value. The structure of these…
This paper proposes a public daily-frequency benchmark for post-GFC government-bond CIP deviations. Although CIP deviations are observed daily, the literature lacks a canonical benchmark for daily regressions comparable to standard factor…
We study how sentiment shocks propagate through equity returns and investor clientele using four independent proxies with sign-aligned kappa-rho parameters. A structural calibration links a one standard deviation innovation in sentiment to…
During the 2014 Summer Conferences, both ATLAS and CMS Collaborations of the LHC experiments have demonstrated tremendous efforts in treatment of data and processing more data such that most data on signal strengths have improved;…
Cross-sectional signatures of market panic were recently discussed on daily time scales in [1], extended here to a study of cross-sectional properties of stocks on intra-day time scales. We confirm specific intra-day patterns of dispersion…
Network theory proved recently to be useful in the quantification of many properties of financial systems. The analysis of the structure of investment portfolios is a major application since their eventual correlation and overlap impact the…
This paper introduces a novel multi-moment connectedness network approach for analyzing the interconnectedness of green financial market. Focusing on the impact of monetary policy shocks, our study reveals that connectedness within the…
The financial turmoil surrounding the Great Recession called for unprecedented intervention by Central Banks: unconventional policies affected various areas in the economy, including stock market volatility. In order to evaluate such…
This paper proposes an empirical test of financial contagion in European equity markets during the tumultuous period of 2008-2011. Our analysis shows that traditional GARCH and Gaussian stochastic-volatility models are unable to explain two…
We study the price dynamics of 65 stocks from the Dow Jones Composite Average from 1973 until 2014. We show that it is possible to define a Daily Market Volatility $\sigma(t)$ which is directly observable from data. This quantity is usually…
We propose a deep hedging framework for index option portfolios, grounded in a realistic market simulator that captures the joint dynamics of S&P 500 returns and the full implied volatility surface. Our approach integrates surface-informed…
This study aims to compare multiple deep learning-based forecasters for the task of predicting volatility using multivariate data. The paper evaluates a range of models, starting from simpler and shallower ones and progressing to deeper and…
We address the information content of European option prices about volatility in terms of the Fisher information matrix. We assume that observed option prices are centred on the theoretical price provided by Heston's model disturbed by…
This study investigates the optimal strategy for a firm operating in a dynamic Keynesian market setting. The firm's objective function is optimized using the percent deviations from the symmetric equilibrium of both its own price and the…
We show that the Realized GARCH model yields close-form expression for both the Volatility Index (VIX) and the volatility risk premium (VRP). The Realized GARCH model is driven by two shocks, a return shock and a volatility shock, and these…
We use rank correlations as distance functions to establish the interconnectivity between stock returns, building weighted signed networks for the stocks of seven European countries, the US and Japan. We establish the theoretical…