Related papers: USLV: Unspanned Stochastic Local Volatility Model
This paper introduces the Markov-Switching Multifractal Duration (MSMD) model by adapting the MSM stochastic volatility model of Calvet and Fisher (2004) to the duration setting. Although the MSMD process is exponential $\beta$-mixing as we…
Several asymptotic results for the implied volatility generated by a rough volatility model have been obtained in recent years (notably in the small-maturity regime), providing a better understanding of the shapes of the volatility surface…
The partially observed linear Gaussian system of stochastic differential equations with low noise in observations is considered. A kernel-type estimators are used for estimation of the quadratic variation of the derivative of the limit of…
Stochastic volatility (SV) models mimic many of the stylized facts attributed to time series of asset returns, while maintaining conceptual simplicity. The commonly made assumption of conditionally normally distributed or…
It is well documented that a model for the underlying asset price process that seeks to capture the behaviour of the market prices of vanilla options needs to exhibit both diffusion and jump features. In this paper we assume that the asset…
In this paper we present an algorithm for pricing barrier options in one-dimensional Markov models. The approach rests on the construction of an approximating continuous-time Markov chain that closely follows the dynamics of the given…
This paper discusses the efficient Bayesian estimation of a multivariate factor stochastic volatility (Factor MSV) model with leverage. We propose a novel approach to construct the sampling schemes that converges to the posterior…
We describe a model for evolving commodity forward prices that incorporates three important dynamics which appear in many commodity markets: mean reversion in spot prices and the resulting Samuelson effect on volatility term structure,…
Recent literature seek to forecast implied volatility derived from equity, index, foreign exchange, and interest rate options using latent factor and parametric frameworks. Motivated by increased public attention borne out of the…
We introduce a novel GARCH model that integrates two sources of uncertainty to better capture the rich, multi-component dynamics often observed in the volatility of financial assets. This model provides a quasi closed-form representation of…
Building on a prominent agent-based model, we present a new structural stochastic volatility asset pricing model of fundamentalists vs. chartists where the prices are determined based on excess demand. Specifically, this allows for…
We present a stochastic local volatility model for derivative contracts on commodity futures. The aim of the model is to be able to recover the prices of derivative claims both on futures contracts and on indices on futures strategies.…
This paper presents two stochastic model predictive control methods for linear time-invariant systems subject to unbounded additive uncertainties. The new methods are developed by formulating the chance constraints into deterministic form,…
We introduce a new class of continuous-time models of the stochastic volatility of asset prices. The models can simultaneously incorporate roughness and slowly decaying autocorrelations, including proper long memory, which are two stylized…
Accurate forecasting of volatility and return quantiles is essential for evaluating financial tail risks such as value-at-risk and expected shortfall. This study proposes an extension of the traditional stochastic volatility model, termed…
We consider stochastic volatility dynamics driven by a general H\"older continuous Volterra-type noise and with unbounded drift. For these so-called SVV-models, we consider the explicit computation of quadratic hedging strategies. While the…
Although multivariate stochastic volatility models usually produce more accurate forecasts compared to the MGARCH models, their estimation techniques such as Bayesian MCMC typically suffer from the curse of dimensionality. We propose a fast…
We consider the pricing of variable annuities (VAs) with general fee structures under popular stochastic volatility models such as Heston, Hull-White, Scott, $\alpha$-Hypergeometric, $3/2$, and $4/2$ models. In particular, we analyze the…
Based on the existing literature, this article presents the different ways of choosing the parameters of stochastic volatility models in general, in the context of pricing financial derivative contracts. This includes the use of stochastic…
This paper describes a flexible and tractable bottom-up dynamic correlation modelling framework with a consistent stochastic recovery specification. The stochastic recovery specification only models the first two moments of the spot…