Related papers: A Market Model for VIX Futures

Predicting volatility in financial markets, including stocks, index ETFs, foreign exchange, and cryptocurrencies, remains a challenging task due to the inherent complexity and non-linear dynamics of these time series. In this study, I apply…

This paper investigates the structural dynamics of stock market volatility through the Financial Chaos Index, a tensor- and eigenvalue-based measure designed to capture realized volatility via mutual fluctuations among asset prices.…

Closed form formulas for swaption prices in HJM model are derived. These formulas are used for nonparametric fit of deterministic forward volatility. It is demonstrated that this formula and non-parametric fit works very well and can be…

We investigate model risk and distributionally robust optimization (DRO) under marginal and martingale constraints. Building on our previous work, we address the previously open case of static hedging with second-period maturity vanilla…

We propose Variational Heteroscedastic Volatility Model (VHVM) -- an end-to-end neural network architecture capable of modelling heteroscedastic behaviour in multivariate financial time series. VHVM leverages recent advances in several…

We formulate and analyze an inverse problem using derivatives prices to obtain an implied filtering density on volatility's hidden state. Stochastic volatility is the unobserved state in a hidden Markov model (HMM) and can be tracked using…

We apply vector quantisation within mixed one- and two-factor Bergomi models to implement a fast and efficient approach for option pricing in these models. This allows us to calibrate such models to market data of VIX futures and options.…

In this paper, we study the pricing of contracts in fixed income markets under volatility uncertainty in the sense of Knightian uncertainty or model uncertainty. The starting point is an arbitrage-free bond market under volatility…

We revisit the problem of pricing options with historical volatility estimators. We do this in the context of a generalized GARCH model with multiple time scales and asymmetry. It is argued that the reason for the observed volatility risk…

We develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted…

In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…

We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…

It is known that the implied volatility skew of FX options demonstrates a stochastic behavior which is called stochastic skew. In this paper we create stochastic skew by assuming the spot/instantaneous variance correlation to be stochastic.…

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…

We propose a framework to study optimal trading policies in a one-tick pro-rata limit order book, as typically arises in short-term interest rate futures contracts. The high-frequency trader has the choice to trade via market orders or…

The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…

In this paper, we introduce a data-driven, single-parameter Markov diffusion model for the VIX. The volatility factor evolves in $(-1,1)$ with a uniform invariant distribution ensured by Legendre polynomials, mapped to the empirical…

Joint calibration to SPX and VIX market data is a delicate task that requires sophisticated modeling and incurs significant computational costs. The latter is especially true when pricing of volatility derivatives hinges on nested Monte…

We give a complete solution to the problem of minimizing the expected liquidity costs in presence of a general drift when the underlying market impact model has linear transient price impact with exponential resilience. It turns out that…

In this paper, we employ the Heston stochastic volatility model to describe the stock's volatility and apply the model to derive and analyze the optimal trading strategies for dealers in a security market. We also extend our study to option…