Related papers: Leverage effect in energy futures
We point out a stunning time asymmetry in the short time cross correlations between intra-day and overnight volatilities (absolute values of log-returns of stock prices). While overnight volatility is significantly (and positively)…
Hydro-kinetic theory of thermal fluctuations is applied to a non-conformal relativistic fluid. Solving the hydro-kinetic equations for an isotropically expanding background we find that hydrodynamic fluctuations give ultraviolet divergent…
The price of electricity is far more volatile than that of other commodities normally noted for extreme volatility. Demand and supply are balanced on a knife-edge because electric power cannot be economically stored, end user demand is…
Invariance properties of physical systems govern their behavior: energy conservation in turbulence drives a wide distribution of energy among modes, observed in geophysical or astrophysical flows. In ideal hydrodynamics, the role of…
We address the problem of long-range memory in the financial markets. There are two conceptually different ways to reproduce power-law decay of auto-correlation function: using fractional Brownian motion as well as non-linear stochastic…
As the proportion of total power supplied by renewable sources increases, it gets more costly to use reserve generation to compensate for the variability of renewables like solar and wind. Hence attention has been drawn to exploiting…
Although stochastic volatility and GARCH (generalized autoregressive conditional heteroscedasticity) models have successfully described the volatility dynamics of univariate asset returns, extending them to the multivariate models with…
In the stochastic volatility models for multivariate daily stock returns, it has been found that the estimates of parameters become unstable as the dimension of returns increases. To solve this problem, we focus on the factor structure of…
Multivariate probability density functions of returns are constructed in order to model the empirical behavior of returns in a financial time series. They describe the well-established deviations from the Gaussian random walk, such as an…
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…
For fluctuating currents in non-equilibrium steady states, the recently discovered thermodynamic uncertainty relation expresses a fundamental relation between their variance and the overall entropic cost associated with the driving. We show…
We investigate the interplay between Horava-Lifshitz (HL) gravity and more general theories where the local Hamiltonian constraint is lost, for example due to the time variability of the Lagrangian (e.g. via its parameters) where time is…
In this paper we introduce a general method for estimating the quadratic covariation of one or more spot parameters processes associated with continuous time semimartingales. This estimator is applicable to a wide range of spot parameter…
This paper shows the relationship between the forward start volatility swap price and the forward start zero vanna implied volatility of forward start options in rough volatility models. It is shown that in the short time-to-maturity limit…
Load-serving entities which procure electricity from the wholesale electricity market to service end-users face significant quantity and price risks due to the volatile nature of electricity demand and quasi-fixed residential tariffs at…
We present an option pricing formula for European options in a stochastic volatility model. In particular, the volatility process is defined using a fractional integral of a diffusion process and both the stock price and the volatility…
We present an analysis and discuss consequences of the strong correlations of the configurational parts of pressure and energy in their equilibrium fluctuations at fixed volume reported for simulations of several liquids in the companion…
Long Memory Stochastic volatility (LMSV) models capture two standardized features of financial data: the log-returns are uncorrelated, but their squares, or absolute values are (highly) dependent and they may have heavy tails. EGARCH and…
Barrier derivatives depend on extrema and first-passage events and are therefore highly sensitive to volatility dynamics -- especially to the instantaneous return-volatility correlation $\rho$, often called ``leverage''. This sensitivity…
This paper characterizes the equilibrium in a continuous time financial market populated by heterogeneous agents who differ in their rate of relative risk aversion and face convex portfolio constraints. The model is studied in an…