Related papers: Absolute Return Volatility
In this paper, we are concerned with nonparametric inference on the volatility of volatility process in stochastic volatility models. We construct several estimators for its integrated version in a high-frequency setting, all based on…
We consider a problem of optimal investment with intermediate consumption in the framework of an incomplete semimartingale model of a financial market. We show that a necessary and sufficient condition for the validity of key assertions of…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
This paper investigates problems associated with the valuation of callable American volatility put options. Our approach involves modeling volatility dynamics as a mean-reverting 3/2 volatility process. We first propose a pricing formula…
Based on a criterion of mathematical simplicity and consistency with empirical market data, a stochastic volatility model has been obtained with the volatility process driven by fractional noise. Depending on whether the stochasticity…
We introduce a novel stochastic volatility model where the squared volatility of the asset return follows a Jacobi process. It contains the Heston model as a limit case. We show that the joint density of any finite sequence of log returns…
Volatility is a natural risk measure in finance as it quantifies the variation of stock prices. A frequently considered problem in mathematical finance is to forecast different estimates of volatility. What makes it promising to use deep…
We establish connections between optimal transport theory and the dynamic version of the Kyle model, including new characterizations of informed trading profits via conjugate duality and Monge-Kantorovich duality. We use these connections…
This paper describes the dependence of market-based statistical moments of returns on statistical moments and correlations of the current and past trade values. We use Markowitz's definition of value weighted return of a portfolio as the…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both the drift and volatility of the driving process. At a technical level, the analysis requires a…
Capital allocation principles are used in various contexts in which a risk capital or a cost of an aggregate position has to be allocated among its constituent parts. We study capital allocation principles in a performance measurement…
A representative investor generates realistic and complex security price paths by following this trading strategy: if, a few ticks ago, the market asset had two consecutive upticks or two consecutive downticks, then sell, and otherwise buy.…
We analyze the performance of RiskMetrics, a widely used methodology for measuring market risk. Based on the assumption of normally distributed returns, the RiskMetrics model completely ignores the presence of fat tails in the distribution…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…
Revert protection is a feature provided by some blockchain platforms that prevents users from incurring fees for failed transactions. We study the economic implications and benefits of revert protection in the context of priority gas…
Forecasting the volatility of financial assets is essential for various financial applications. This paper addresses the challenging task of forecasting the volatility of financial assets with limited historical data, such as new issues or…
A spin model is used for simulations of financial markets. To determine return volatility in the spin financial market we use the GARCH model often used for volatility estimation in empirical finance. We apply the Bayesian inference…
Based on a criterium of mathematical simplicity and consistency with empirical market data, a stochastic volatility model has been obtained with the volatility process driven by fractional noise. Depending on whether the stochasticity…
We review the recently introduced concept of variety of a financial portfolio and we sketch its importance for risk control purposes. The empirical behaviour of variety, correlation, exceedance correlation and asymmetry of the probability…
We investigate financial markets under model risk caused by uncertain volatilities. For this purpose we consider a financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of…