Related papers: Volatility Swap Under the SABR Model
This paper presents a novel approach to stochastic volatility (SV) modeling by utilizing nonparametric techniques that enhance our ability to capture the volatility of financial time series data, with a particular emphasis on the…
The question of the volatility roughness is interpreted in the framework of a data-reconstructed fractional volatility model, where volatility is driven by fractional noise. Some examples are worked out and also, using Malliavin calculus…
A three-dimensional extension of the structural default model with firms' values driven by correlated diffusion processes is presented. Green's function based semi-analytical methods for solving the forward calibration problem and backward…
In this paper we consider Fourier transform techniques to efficiently compute the Value-at-Risk and the Conditional Value-at-Risk of an arbitrary loss random variable, characterized by having a computable generalized characteristic…
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 present a multivariate stochastic volatility model with leverage, which is flexible enough to recapture the individual dynamics as well as the interdependencies between several assets while still being highly analytically tractable.…
In this paper, a new way to integrate volatility information for estimating value at risk (VaR) and conditional value at risk (CVaR) of a portfolio is suggested. The new method is developed from the perspective of Bayesian statistics and it…
This paper presents a new method to compute VaR (value at risk) and perform corresponding variance based sensitivity analysis. VaR has a long history of being applied in stock price prediction and investment portfolio analysis. Traditional…
This paper advances interest rate modeling in the post-LIBOR era by introducing rough stochastic volatility into the Forward Market Model (FMM). We establish a rigorous asymptotic expansion of swaption implied volatility, connecting the FMM…
In a financial market model, we consider the variance-optimal semi-static hedging of a given contingent claim, a generalization of the classic variance-optimal hedging. To obtain a tractable formula for the expected squared hedging error…
We propose a novel time discretization for the log-normal SABR model which is a popular stochastic volatility model that is widely used in financial practice. Our time discretization is a variant of the Euler-Maruyama scheme. We study its…
The Stochastic Volatility (SV) model and its variants are widely used in the financial sector while recurrent neural network (RNN) models are successfully used in many large-scale industrial applications of Deep Learning. Our article…
HYGARCH model is basically used to model long-range dependence in volatility. We propose Markov switch smooth-transition HYGARCH model, where the volatility in each state is a time-dependent convex combination of GARCH and FIGARCH. This…
In a money exchange process involving a seller and a buyer, we develop a straightforward model encompassing conservative, non-conservative, and systems with or without debt. Our model integrates the Fermi function to capture the behavior of…
As the dynamic structure of the financial markets is subject to dramatic changes, a model capable of providing consistently accurate volatility estimates must not make strong assumptions on how prices change over time. Most volatility…
We propose a fast and accurate numerical method for pricing European swaptions in multi-factor Gaussian term structure models. Our method can be used to accelerate the calibration of such models to the volatility surface. The pricing of an…
The pricing of currency options is largely dependent on the dynamic relationship between a pair of currencies. Typically, the pricing of options with payoffs dependent on multi-assets becomes tricky for reasons such as the non-Gaussian…
When trading American and Asian options in the FX derivatives market, banks must calculate prices using a complex mathematical model. It is often observed that different models produce varying prices for the same exotic option, which…
Implied volatilities form a well-known structure of smile or surface which accommodates the Bachelier model and observed market prices of interest rate options. For the swaptions that we study, three parameters are taken into account for…
This paper considers the case of pricing discretely-sampled variance swaps under the class of equity-interest rate hybridization. Our modeling framework consists of the equity which follows the dynamics of the Heston stochastic volatility…