Related papers: Variance Dynamics - An empirical journey
Stylized facts can be regarded as constraints for any modeling attempt of price dynamics on a financial market, in that an empirically reasonable model has to reproduce these stylized facts at least qualitatively. The dynamics of market…
We introduce the concept of virtual volatility. This simple but new measure shows how to quantify the uncertainty in the forecast of the drift component of a random walk. The virtual volatility also is a useful tool in understanding the…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
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 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…
We consider the robust utility maximization using a static holding in derivatives and a dynamic holding in the stock. There is no fixed model for the price of the stock but we consider a set of probability measures (models) which are not…
We propose a comprehensive treatment of the leverage effect, i.e. the relationship between returns and volatility of a specific asset, focusing on energy commodities futures, namely Brent and WTI crude oils, natural gas and heating oil.…
In this paper, a pricing formula for volatility swaps is delivered when the underlying asset follows the stochastic volatility model with jumps and stochastic intensity. By using Feynman-Kac theorem, a partial integral differential equation…
This paper discusses a novel explanation for asymmetric volatility based on the anchoring behavioral pattern. Anchoring as a heuristic bias causes investors focusing on recent price changes and price levels, which two lead to a belief in…
In an era when derivatives is getting popular, risk management has gradually become the core content of modern finance. In order to study how to accurately estimate the volatility of the S&P 500 index, after introducing the theoretical…
The cryptocurrency market is volatile, non-stationary and non-continuous. Together with liquid derivatives markets, this poses a unique opportunity to study risk management, especially the hedging of options, in a turbulent market. We study…
This paper develops a dynamic factor model in which common level and volatility factors evolve jointly, allowing conditional means and variances to interact endogenously within a large-information setting. The joint evolution of these…
The objective of this work is the investigation of complexity, asymmetry, stochasticity and non-linearity of the financial and economic systems by using the tools of statistical mechanics and information theory. More precisely, this thesis…
Linear mixed-effects models are widely used in analyzing repeated measures data, including clustered and longitudinal data, where inferences of both fixed effects and variance components are of importance. Unlike the fixed effect inference…
We introduce an affine extension of the Heston model where the instantaneous variance process contains a jump part driven by $\alpha$-stable processes with $\alpha\in(1,2]$. In this framework, we examine the implied volatility and its…
We examine how monetary shocks spread throughout an economic model characterized by sticky prices and general equilibrium, where the pricing strategies of firms are interlinked, fostering a mutually beneficial relationship. In this dynamic…
We propose a non-linear observation-driven version of the Hasbrouck (1991) model for dynamically estimating trades' market impact and information content. We find that market impact displays an intraday pattern superimposed with large…
A new modelling approach that directly prescribes dynamics to the term structure of VIX futures is proposed in this paper. The approach is motivated by the tractability enjoyed by models that directly prescribe dynamics to the VIX,…