Related papers: Two unconditionally implied parameters and volatil…
Implicit probabilistic models are models defined naturally in terms of a sampling procedure and often induces a likelihood function that cannot be expressed explicitly. We develop a simple method for estimating parameters in implicit models…
Low-frequency historical data, high-frequency historical data and option data are three major sources, which can be used to forecast the underlying security's volatility. In this paper, we propose two econometric models, which integrate…
We present a numerically efficient approach for learning a risk-neutral measure for paths of simulated spot and option prices up to a finite horizon under convex transaction costs and convex trading constraints. This approach can then be…
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,…
This paper investigates short-term behaviors of implied volatility of derivatives written on indexes in equity markets when the index processes are constructed by using a ranking procedure. Even in simple market settings where stock prices…
We develop closed-form expansions for the implied volatility of VIX options within the class of forward variance models. Our approach builds on weak-approximation techniques for VIX option prices and yields explicit implied volatility…
Credit capital requirements in Internal Rating Based approaches require the calibration of two key parameters: the probability of default and the loss-given-default. This letter considers the uncertainty about these two parameters and…
We propose a two-step framework for predicting the implied volatility surface over time without static arbitrage. In the first step, we select features to represent the surface and predict them over time. In the second step, we use the…
The asymptotic behavior of the implied volatility associated with a general call pricing function has been extensively studied in the last decade. The main topics discussed in this paper are Lee's moment formulas for the implied volatility,…
The purpose of this paper is to study the generalized Fong--Vasicek two-factor interest rate model with stochastic volatility. In this model the dispersion of the stochastic short rate (square of volatility) is assumed to be stochastic as…
Implied volatility IV is a key metric in financial markets, reflecting market expectations of future price fluctuations. Research has explored IV's relationship with moneyness, focusing on its connection to the implied Hurst exponent H. Our…
In the present paper, several properties concerning generalized derivatives of multifunctions implicitly defined by set-valued inclusions are studied by techniques of variational analysis. Set-valued inclusions are problems formalizing the…
Accurately characterizing the implied volatility curves is a central challenge in option pricing and risk management. The classical SABR model by Hagan et al. has been widely adopted in practice due to its well-defined stochastic volatility…
This paper develops a flexible and computationally efficient multivariate volatility model, which allows for dynamic conditional correlations and volatility spillover effects among financial assets. The new model has desirable properties…
Stochastic volatility models describe asset prices $S_t$ as driven by an unobserved process capturing the random dynamics of volatility $\sigma_t$. Here, we quantify how much information about $\sigma_t$ can be inferred from asset prices…
We propose model-free (nonparametric) estimators of the volatility of volatility and leverage effect using high-frequency observations of short-dated options. At each point in time, we integrate available options into estimates of the…
Measuring model risk is required by regulators on financial and insurance markets. We separate model risk into parameter estimation risk and model specification risk, and we propose expected shortfall type model risk measures applied to…
This paper addresses the structure and dynamics of an open market economy and its relations with the real interest rate. In this respect, the paper is situated within a broad conventional literature. However, it departs from the standard…
In this paper, we present a unified framework for decision making under uncertainty. Our framework is based on the composite of two risk measures, where the inner risk measure accounts for the risk of decision given the exact distribution…
The paper demonstrates that a pure-diffusion 3/2 model is able to capture the observed upward-sloping implied volatility skew in VIX options. This observation contradicts a common perception in the literature that jumps are required for the…