Related papers: The Implied Volatility Analysis: The South African…
This paper introduces unified models for high-dimensional factor-based Ito process, which can accommodate both continuous-time Ito diffusion and discrete-time stochastic volatility (SV) models by embedding the discrete SV model in the…
Local Stochastic Volatility (LSV) models have been used for pricing and hedging derivatives positions for over twenty years. An enormous body of literature covers analytical and numerical techniques for calibrating the model to market data.…
High-frequency data observed on the prices of financial assets are commonly modeled by diffusion processes with micro-structure noise, and realized volatility-based methods are often used to estimate integrated volatility. For problems…
The leverage effect-- the correlation between an asset's return and its volatility-- has played a key role in forecasting and understanding volatility and risk. While it is a long standing consensus that leverage effects exist and improve…
This study investigates the relationship between the market volatility of the iShares Asia 50 ETF (AIA) and economic and market sentiment indicators from the United States, China, and globally during periods of economic uncertainty.…
Long memory and volatility clustering are two stylized facts frequently related to financial markets. Traditionally, these phenomena have been studied based on conditionally heteroscedastic models like ARCH, GARCH, IGARCH and FIGARCH, inter…
Mounting empirical evidence suggests that the observed extreme prices within a trading period can provide valuable information about the volatility of the process within that period. In this paper we define a class of stochastic volatility…
The recent empirical work of Amaya et al. (2015) has pointed out that the realized skewness, which is the sample skewness of intraday high-frequency returns of a financial asset, serves as forecasting future returns in the cross-section.…
One of the major issues studied in finance that has always intrigued, both scholars and practitioners, and to which no unified theory has yet been discovered, is the reason why prices move over time. Since there are several well-known…
Econophysics and econometrics agree that there is a correlation between volume and volatility in a time series. Using empirical data and their distributions, we further investigate this correlation and discover new ways that volatility and…
The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with…
We study a series of static and dynamic portfolios of VIX futures and their effectiveness to track the VIX index. We derive each portfolio using optimization methods, and evaluate its tracking performance from both empirical and theoretical…
In this paper, we first investigate the estimation of the empirical joint Laplace transform of volatilities of two semi-martingales within a fixed time interval [0, T] by using overlapped increments of high-frequency data. The proposed…
We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated…
Heavy tailed phenomena are naturally analyzed by extreme value statistics. A crucial step in such an analysis is the estimation of the extreme value index, which describes the tail heaviness of the underlying probability distribution. We…
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…
We show how bad and good volatility propagate through forex markets, i.e., we provide evidence for asymmetric volatility connectedness on forex markets. Using high-frequency, intra-day data of the most actively traded currencies over 2007 -…
We calculate realized volatility of the Nikkei Stock Average (Nikkei225) Index on the Tokyo Stock Exchange and investigate the return dynamics. To avoid the bias on the realized volatility from the non-trading hours issue we calculate…
This paper derives explicit formulas for both the small and large time limits of the implied volatility in the minimal market model. It is shown that interest rates do impact on the implied volatility in the long run even though they are…
We investigate quantitatively the so-called leverage effect, which corresponds to a negative correlation between past returns and future volatility. For individual stocks, this correlation is moderate and decays exponentially over 50 days,…