Related papers: Two unconditionally implied parameters and volatil…
We consider situations where data have been collected such that the sampling depends on the outcome of interest and possibly further covariates, as for instance in case-control studies. Graphical models represent assumptions about the…
The class of affine LIBOR models is appealing since it satisfies three central requirements of interest rate modeling. It is arbitrage-free, interest rates are nonnegative and caplet and swaption prices can be calculated analytically. In…
In this paper, we study the asymptotic behaviors of implied volatility of an affine jump-diffusion model. Let log stock price under risk-neutral measure follow an affine jump-diffusion model, we show that an explicit form of moment…
In this paper, we investigate a financial market model consisting of a risky asset, modeled as a general diffusion parameterized by a scale function and a speed measure, and a bank account process with a constant interest rate. This…
In this paper, we present the double smoothed nonparametric approach for infinitesimal conditional volatility of jump-diffusion model based on high frequency data. Under certain minimal conditions, we obtain the strong consistency and…
The purpose of this paper is to utilize statistical methodologies to infer from market prices of assets and their derivatives the magnitude of the set of a measure M that defines acceptance sets of risky future cash flows. Specifically, we…
This paper examines the possibility of using derivative-implied risk premia to explain stock returns. The rapid development of derivative markets has led to the possibility of trading various kinds of risks, such as credit and interest rate…
Economic and financial models -- such as vector autoregressions, local projections, and multivariate volatility models -- feature complex dynamic interactions and spillovers across many time series. These models can be integrated into a…
We present a stochastic-local volatility model for derivative contracts on commodity futures able to describe forward-curve and smile dynamics with a fast calibration to liquid market quotes. A parsimonious parametrization is introduced to…
We introduce a tractable multi-currency model with stochastic volatility and correlated stochastic interest rates that takes into account the smile in the FX market and the evolution of yield curves. The pricing of vanilla options on FX…
The original Deffuant model consists of a finite number of agents whose opinion is a number in $[0,1]$. Two socially connected agents are uniformly randomly selected at each time step and approach each other at a rate $\mu\in [0,1/2]$ if…
In this paper, we introduce a new time series model having a stochastic exponential tail. This model is constructed based on the Normal Tempered Stable distribution with a time-varying parameter. The model captures the stochastic…
We present two explicit rational formulae for Bachelier, or normal, implied volatility. The formulae take the option price, forward, strike, and expiry as inputs and return the implied normal volatility without iteration. They follow the…
We extend upon the saddle-point equation presented in [1] to derive large-time model-implied volatility smiles, providing its theoretical foundation and studying its applications in classical models. As long as characteristic function…
We introduce a multi-factor stochastic volatility model based on the CIR/Heston volatility process that incorporates seasonality and the Samuelson effect. First, we give conditions on the seasonal term under which the corresponding…
Model uncertainty has been one prominent issue both in the theory of risk measures and in practice such as financial risk management and regulation. Motivated by this observation, in this paper, we take a new perspective to describe the…
Researchers in explainable artificial intelligence have developed numerous methods for helping users understand the predictions of complex supervised learning models. By contrast, explaining the $\textit{uncertainty}$ of model outputs has…
In financial terms, an implied volatility surface can be described by its term structure, its skewness and its overall volatility level. We use a PCA variational auto-encoder model to perfectly represent these descriptors into a latent…
Anomalous diffusions arise as scaling limits of continuous-time random walks (CTRWs) whose innovation times are distributed according to a power law. The impact of a non-exponential waiting time does not vanish with time and leads to…
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,…