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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 model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…
A joint conditional autoregressive expectile and Expected Shortfall framework is proposed. The framework is extended through incorporating a measurement equation which models the contemporaneous dependence between the realized measures and…
In this paper we study the pricing of exchange options when underlying assets have stochastic volatility and stochastic correlation. An approximation using a closed-form approximation based on a Taylor expansion of the conditional price is…
In an asset return series there is a conditional asymmetric dependence between current return and past volatility depending on the current return's sign. To take into account the conditional asymmetry, we introduce new models for asset…
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…
Accurate prediction of financial market volatility is critical for risk management, derivatives pricing, and investment strategy. In this study, we propose a multitude of regime-switching methods to improve the prediction of S&P 500…
In an efficient stock market, the returns and their time-dependent volatility are often jointly modeled by stochastic volatility models (SVMs). Over the last few decades several SVMs have been proposed to adequately capture the defining…
In this paper, we model financial markets with semi-Markov volatilities and price covarinace and correlation swaps for this markets. Numerical evaluations of vari- nace, volatility, covarinace and correlations swaps with semi-Markov…
This paper examines how shocks to currency volatilities predict exchange rates. Using option-implied volatilities, we construct a dynamic, directed network of volatility connections. Currencies that transmit more volatility shocks, which…
This paper presents non-parametric estimates of spectral risk measures applied to long and short positions in 5 prominent equity futures contracts. It also compares these to estimates of two popular alternative measures, the Value-at-Risk…
This paper describes a general approach for stochastic modeling of assets returns and liability cash-flows of a typical pensions insurer. On the asset side, we model the investment returns on equities and various classes of fixed-income…
We propose a novel machine learning approach for forecasting the distribution of stock returns using a rich set of firm-level and market predictors. Our method combines a two-stage quantile neural network with spline interpolation to…
We study the relation between serial correlation of financial returns and volatility at intraday level for the S&P500 stock index. At daily and weekly level, serial correlation and volatility are known to be negatively correlated (LeBaron…
Many economic variables feature changes in their conditional mean and volatility, and Time Varying Vector Autoregressive Models are often used to handle such complexity in the data. Unfortunately, when the number of series grows, they…
Statistical learning evolves quickly with more and more sophisticated models proposed to incorporate the complicated data structure from modern scientific and business problems. Varying index coefficient models extend varying coefficient…
A novel approach for dynamic modeling and forecasting of realized covariance matrices is proposed. Realized variances and realized correlation matrices are jointly estimated. The one-to-one relationship between a positive definite…
In this article we present a continuous time model for natural gas and crude oil future prices. Its main feature is the possibility to link both energies in the long term and in the short term. For each energy, the future returns are…
We derive behavioral finance option pricing formulas consistent with the rational dynamic asset pricing theory. In the existing behavioral finance option pricing formulas, the price process of the representative agent is not a…
We study the Hull-White model for the term structure of interest rates in the presence of volatility uncertainty. The uncertainty about the volatility is represented by a set of beliefs, which naturally leads to a sublinear expectation and…