Related papers: The Multivariate Mixture Dynamics Model: Shifted d…
Affine Diffusion dynamics are frequently used for Valuation Adjustments (xVA) calculations due to their analytic tractability. However, these models cannot capture the market-implied skew and smile, which are relevant when computing xVA…
Implied volatilities form a well-known structure of smile or surface which accommodates the Bachelier model and observed market prices of interest rate options. For the swaptions that we study, three parameters are taken into account for…
This paper introduces a dynamic minimum variance portfolio (MVP) model using nonlinear volatility dynamic models, based on high-frequency financial data. Specifically, we impose an autoregressive dynamic structure on MVP processes, which…
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…
The endeavor of stock trend forecasting is principally focused on predicting the future trajectory of the stock market, utilizing either manual or technical methodologies to optimize profitability. Recent advancements in machine learning…
This study presents contemporaneous modeling of asset return and price range within the framework of stochastic volatility with leverage. A new representation of the probability density function for the price range is provided, and its…
Financial markets tend to switch between various market regimes over time, making stationarity-based models unsustainable. We construct a regime-switching model independent of asset classes for risk-adjusted return predictions based on…
This paper proposes a semiparametric stochastic volatility (SV) model that relaxes the restrictive Gaussian assumption in both the return and volatility error terms, allowing them to follow flexible, nonparametric distributions with…
Empirical studies have emphasized that the equity implied volatility is characterized by a negative skew inversely proportional to the square root of the time-to-maturity. We examine the short-time-to-maturity behavior of the implied…
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…
This PhD Thesis presents an investigation into the analysis of financial returns using mixture models, focusing on mixtures of generalized normal distributions (MGND) and their extensions. The study addresses several critical issues…
We introduce an extension of finite mixture models by incorporating skew-normal distributions within a Hidden Markov Model framework. By assuming a constant transition probability matrix and allowing emission distributions to vary according…
This study investigates the short-term asymptotic behavior of the implied volatility surface (IVS), with a particular focus on the at-the-money (ATM) skew and curvature, which are key determinants of the IVS shape and whose are widely…
Implied volatility is at the very core of modern finance, notwithstanding standard option pricing models continue to derive option prices starting from the joint dynamics of the underlying asset price and the spot volatility. These models…
A variance swap is a derivative with a path-dependent payoff which allows investors to take positions on the future variability of an asset. In the idealised setting of a continuously monitored variance swap written on an asset with…
We present and discuss a stochastic model of financial assets dynamics based on the idea of an inverse renormalization group strategy. With this strategy we construct the multivariate distributions of elementary returns based on the scaling…
We review and illustrate how the volatility smile translates into a probability distribution, the market-implied probability distribution representing believes priced in. The effects of changes in the smile are examined. Special attention…
Albeit of crucial interest for both financial practitioners and researchers, market-implied volatility data of European swaptions often exhibit large portions of missing quotes due to illiquidity of the various underlying swaption…
In the regime switching extension of Black-Scholes-Merton model of asset price dynamics, one assumes that the volatility coefficient evolves as a hidden pure jump process. Under the assumption of Markov regime switching, we have considered…
We investigate the asymptotic behaviour of the implied volatility in the Bachelier setting, extending the large-strike results established for the Black-Scholes framework. Exploiting the theory of regular variation, we derive explicit…