Related papers: The Implied Volatility Analysis: The South African…
We analyze the VIX futures market with a focus on the exchange-traded notes written on such contracts, in particular we investigate the VXX notes tracking the short-end part of the futures term structure. Inspired by recent developments in…
Using a time-varying approach, this paper examines the dynamics of volatility in the REIT sector. The results highlight the attractiveness and suitability of using GARCH based approaches in the modeling of daily REIT volatility. The paper…
This paper introduces a unified approach for modeling high-frequency financial data that can accommodate both the continuous-time jump-diffusion and discrete-time realized GARCH model by embedding the discrete realized GARCH structure in…
We introduce the Historical and Dynamic Volatility Ratios (HVR/DVR) and show that equity and index volatilities are cointegrated at intraday and daily horizons. This allows us to construct a VECM to forecast portfolio volatility by…
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…
Based on It\^o semimartingale models, several studies have proposed methods for forecasting intraday volatility using high-frequency financial data. These approaches typically rely on restrictive parametric assumptions and are often…
We develop a dynamic version of the SSVI parameterisation for the total implied variance, ensuring that European vanilla option prices are martingales, hence preventing the occurrence of arbitrage, both static and dynamic. Insisting on the…
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…
For a given time horizon DT, this article explores the relationship between the realized volatility (the volatility that will occur between t and t+DT), the implied volatility (corresponding to at-the-money option with expiry at t+DT), and…
Multiscale stochastic volatility models have been developed as an efficient way to capture the principle effects on derivative pricing and portfolio optimization of randomly varying volatility. The recent book Fouque, Papanicolaou, Sircar…
This study delves into the intricate realm of risk evaluation within the domain of specific financial derivatives, notably options. Unlike other financial instruments, like bonds, options are susceptible to broader risks. A distinctive…
Jumps and market microstructure noise are stylized features of high-frequency financial data. It is well known that they introduce bias in the estimation of volatility (including integrated and spot volatilities) of assets, and many methods…
Sensitivity analyses reveal the influence of various modeling choices on the outcomes of statistical analyses. While theoretically appealing, they are overwhelmingly inefficient for complex Bayesian models. In this work, we propose…
This paper proposes an enhanced approach to modeling and forecasting volatility using high frequency data. Using a forecasting model based on Realized GARCH with multiple time-frequency decomposed realized volatility measures, we study the…
We implement a systematic asset allocation model using the Historical Simulation with Flexible Probabilities (HS-FP) framework developed by Meucci. The HS-FP framework is a flexible non-parametric estimation approach that considers future…
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…
This paper introduces a Bayesian vector autoregression (BVAR) with stochastic volatility-in-mean and time-varying skewness. Unlike previous approaches, the proposed model allows both volatility and skewness to directly affect macroeconomic…
We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…
Selecting stock portfolios and assessing their relative volatility risk compared to the market as a whole, market indices, or other portfolios is of great importance to professional fund managers and individual investors alike. Our research…
We address the information content of European option prices about volatility in terms of the Fisher information matrix. We assume that observed option prices are centred on the theoretical price provided by Heston's model disturbed by…